Demographic shifts are changing the landscape
Natural demographic shifts are shaping to be the most promising trend emerging for the mortgage industry.
“As challenging as ’23 was, this is the best news we have for our industry ,” Michael Fratantoni (pictured), chief economist for the Mortgage Bankers Association (MBA) said during a recent gathering of industry pundits hosted by Snapdocs. “Fundamentally, the demographic are going to be strongly supportive for the purchase market for the medium term – call it the next five, six, seven years. It just comes from the age distribution of the US population.”
Pointing to his charts, Fratantoni detailed where the demographic sweets spot is but prefaced with additional context into the housing market.
Crunching the numbers to excel in the purchase market
“Currently, we have 50 million people in this country between 30 and 40,” Fratantoni said. “We generate about a million and a half households a year. By comparison, from 2000 to 2015, it was closer to a million a year. So we’re generating 50% more households annually.”
This massive slice of humanity all need housing, he said: “They need to live somewhere,” Fratantoni said. “Whether they’re going to rent or whether they’re going to buy, our industry is either going to finance them directly or finance their landlord. It’s a tremendous amount of housing demand.”
It’s key to understand those demographics while preparing to market to those in that age group as they seek reliable housing: “When it comes to homeownership, we didn’t highlight the 30 to 40 haphazardly,” he said. “This is truly an interesting range because if you look at those under 35, the homeownership rate is about 38% and when you look at those from 35 to 44, it’s at 63%. For many people, if they’re going to buy a home, this is the age in which they decide to do it.”
While the market has been volatile the last few years, those demographics are shaping up to be advantageous for the industry. “The pandemic put a wrench in lots of plans,” the economist said. “The millennial generation has been late hitting other benchmarks like getting married, having kids, buying cars, all kinds of things. But they’re coming, it’s happening now. And we think this is going to be a strongly supportive force for housing market – again, for the medium term.”
The other demographic to watch: A burgeoning Hispanic market
Candice McNaught, senior vice president of national sales at Supreme Lending, echoed the sentiments. Joining Fratantoni, she suggested her firm is focused on those same age demographics.
“We’ve seen that age definitely increase,” she said. “In 2022, the first-time homebuyer averaged out at 36. I think that number’s now going to increase to 38. I think you’ve got housing affordability that’s compressing this age demographic as well. I think that continues to go up, so you move further up the ladder in this age range.”
The post-pandemic era also yields further opportunities, she noted: “I also think, during COVID, so many people could work remote and they could live wherever they wanted, they weren’t ready to commit to a specific city or state. I also think some companies are bringing back and enforcing office work. It’s exciting because I think we’ll have some great opportunities for first-time homebuyers this year, especially in the second half of this year. Just the slightest dip in rate is going to make them get off the sidelines because they’re not going to want to miss out on opportunities, especially on the investing side.”
Another demographic she’s keeping her eye on is the burgeoning Hispanic market, McNaught said. “By 2030, 56% of Hispanic homeowners will make up our market. We’ve started to pour into translations of our marketing assets, what our digital strategy approaches were and making sure we don’t miss that demographic, because it can be key for us moving forward.”
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