Recognized as the most digital savvy generation in U.S. history, millennials are well known for buying everything, from smartphones to clothing, online or with mobile apps.
Yet, when it comes to purchasing a house—the biggest investment most consumers ever make—millennials are not completely clicking on the internet or apps for a helping hand.
A new survey by CentSai, a New York-based financial wellness community, shows that millennials heavily favor using traditional lenders and real estate agents over their online counterparts to help them become homeowners. CentSai‘s findings are based on an the analysis of 2,050 Americans, ages 18 to 34.
Going Offline to Buy a Home
Some 71% of millennials said they would choose a local mortgage lender to get home financing. That is contrary to Fannie Mae’s 2015 National Housing Survey, which shows that 69% of all homebuyers would apply for an online mortgage, according to CentSai. Also, CentSai‘s research indicates that 75% of millennials say they would use a local real estate agent to find a house to buy.
“The revelations are intriguing for many reasons,” says Doria Lavagnino, CentSai’s co-founder and president. She claims that millennials make a lot of purchases online, and do most of their social interaction on sites like Facebook, Instagram and Pinterest. So, for millennials to choose a long established homebuying method differs from the online strategy that some observers might expect them to use.
The findings are compelling, given that online mortgage and brokerage services are expected to change how many Americans buy homes in future years. “We were surprised to learn that online providers are not yet as big a disruptor with millennials for home buying,” Lavagnino says.
Lavagnino also points out that millennials are staying local, because they highly value the personal touch and knowledge of a local agent. She says that is particularly true when the agent is referred to them by a parent or friend who has bought a house. In addition to having knowledge about local housing markets, conventional realtors can provide millennials details about such matters as school districts, neighborhoods, crime rates, and restaurants, which they might not be able to gather from online agents.
Although online agents and lenders advertise cheaper commissions and financing costs via mobile apps, Lavagnino says millennials are often willing to pay conventional realtors and lenders more, because of the hand-holding, referrals, financial education, and other support they can offer.
“There is a lot that goes into buying a home, so it makes sense that you would want an experienced person you can ask questions to face to face,” Lavagnino says. “That helps put your mind at ease.”
Tech OK for Research
Still, 91% of millennials say they would use an online site or mobile app to research neighborhoods and home prices and to identify houses that they might buy.
In terms of timing, 56% of millennials plan to buy a house in the next two years. Out of the 44% who don’t plan to buy a house in the next two years, 68% are not considering buying a home because they cannot afford to do so. Only 12% liked the freedom of renting, and 10% cited student loan debt as a reason not to buy in the next two years. Underemployment and the inability to save enough money for down payments, like previous generations, are other reasons Lavagnino cited as to why millennials are not hastily buying houses.
“A lot of millennials are living day by day, making home affordability tougher for them,” she says.
For more information and data from CentSai‘s graphic survey, click here.
Jeffrey McKinney is a long-time freelance business writer and reporter, who has contributed to BLACK ENTERPRISE magazine for several years on a broad range of business and financial topics.