TheMReport — News and strategies for the evolving mortgage marketplace.
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Th e M Rep o RT | 17 COVER STORY The New Buyer "T he average customer this year is older," Williams noted. "First-time homebuyers in their late 20s to early 30s are struggling due to a number of factors, including high student debt, tighter credit, and the job market. Many college graduates have struggled with low wages or part-time jobs coming out of school. This discouraged group still represents over 12 percent of the labor force." This age group faces other major hurdles to homeowner- ship, including stifling student loan debt and an inability to qualify for a home loan in the post-Dodd Frank world. "With mortgage lenders fo- cused on debt-to-income ratios, college loans are a huge factor," Williams explained. "Overall student debt is at a record high at over $1 trillion, which is caus- ing an increase in renters and fewer 20-something homebuyers. Successful homebuyers in their late 20s and early 30s were those who paid down student loans, had secure full-time jobs with better incomes, and didn't suffer from weak credit scores. But that's another reason for a low turnout in homebuyers. Some people were hit hard on credit scores due to the financial crisis and have not completely healed. Once their scores improve, and loan qualifications loosen some- what, we'll start to see a stronger housing market." Voss says there is another dis- turbing trend afoot. Since parents now have less equity in their homes to help students, fewer parents are able to tap into home equity to pay for college. As this occurs, student debt continues to soar, delaying homeownership even more once the students graduate. Looking Ahead To The Post-Baby Boom Originations Era R elying on older homebuy- ers is not enough to make up for sagging demand in other demographic groups, industry ex- perts suggest. "[W]e did see more Baby Boomers and empty-nesters move into condos and smaller spaces because they just didn't need that much room," explained Williams. "Many of them were all-cash buyers, because they had enough equity in their homes to pay all cash for their new homes." This cash-buyer influence removes the need for mortgage originations, cutting into another potential channel for originations growth. While Williams believes younger buyers will be able to return when their credit scores return and their balance sheets heal, no one has a definitive time frame as for when that is expected to occur. Voss believes thinking ahead and forging relationships with future homeowners may be the only way to loop in tomorrow's first-time buyers, who are simply not ready to buy yet. "It's very hard for us to think ahead," he said of the industry. "We need to work with Realtors and the finan- cial industry," he added. The goal of these needed initiatives would be to connect to younger buyers living at home and help them save and plan for a mortgage, Voss explained. "It is something that needs to happen," he added, while conced- ing that the industry has been less aggressive in planning ahead on this point. For now, Voss is worried about trends that have saved the originations industry in the past, which for now, appear to be somewhat hidden or unknown. "You could always count every four years on a refinance wave," Voss said. But that is no longer as certain, he told the MReport. Furthermore, it is difficult to see an economic boom time ahead that could lift the origina- tions side out of the doldrums, he explained. "You don't see some- thing horrible or good, just a long period of attrition." ´