Why are younger generations not buying houses?

By Jaedri Wood

When a person graduates from college and finds a reliable job, the (seemingly) next logical step would be to take the leap and buy a home. While this may have been the case for the baby boomers, it does not hold true for millennials and younger generations. The Urban Institute reports that today’s young adults are less likely to own a home compared to baby boomers and Gen Xers at the same age: 50% of the surveyed baby boomers and Gen Xers bought their house when they were 25-34 years old, and 27% bought their first home before they turned 25. Comparatively, only 37% of those currently aged 25-34 own a home, and only 13% of those who are 18-24 years old.

The logic of buying a house early, if you can afford it, is sound. The longer you stay in a home, the more equity you build. Those who bought their first home between the ages of 25-34 had the most wealth in equity for their home by the time they were 60 years old. Buying a house earlier resulted in a median home equity of $150,000 (adjusted per 2015 inflation). The ability for younger generations to afford to buy a home is dwindling across generations. Why? Student debt and stagnant wages.

The National Association of Realtors  reports that the median first-time homebuyer in 2017 was 32 years old. However, those home buyers had a median annual income of $75,000—a relatively high income compared to most. Those who landed a job right out of college made much less than $75,000 and are also plagued with student debt. In their 2019 Home Affordability Report, home co-investment company Unison found that 83% of non-homeowners said student debt is the reason they can’t afford to buy a home right now. According to the Federal Reserve, the average college debt among student loan borrowers in America is $32,731. The burden of student debt forces young adults to delay buying a house by seven years on average. Stagnant wages also play a significant part in delaying a home purchase. The median hourly wage—the wage at which half the workforce is paid more, and half the workforce is paid less—sits at $19.33 per hour—or $40,000 a year for a full-time worker. Earning $40,000 annually whilst paying off around $30,000 worth of debt is impossible when looking to apply for a mortgage. Since student loans are included in one’s debt to income ratio, qualifying for a mortgage seems unlikely until later in life for many. So, what can bankers and brokers do to get younger people into homes: more in-depth risk assessment.

It is no secret how low wages and high student loan debt virtually eliminate the ability for younger people to buy a home. So how can these institutions bring the possibility of owning a home back for the next generations? Bankers and Brokers need to be more aware of the impact of student loans and stagnant wages. Instead of dismissing an age group’s ability to buy a home, there needs to be more work put into discovering why the majority of these age groups can’t qualify.

Loan institutions and the mortgage industry can collaborate to mitigate the effects that student loans have on borrowers. This is not to say that every college-aged person is a low-risk investment, but all should not be precluded from owning a home solely because of the money they invested in their education. There is ample opportunity for lending organizations to spend more time educating younger generations on mortgage basics before they make other large investments, so they may make more informed financial decisions in the future. For example: If buyers do not know the requirements for a down payment on a house, they will likely not proactively save for one. Although younger generations may not be buying homes as early as their baby boomer parents or grandparents, the reasons for this are not purely personal choice nor in their control. The first step in being a well-qualified applicant is becoming knowledgeable on what is required and how to get there. Bankers, Brokers and lending institutions have a standing call to action to be more involved in helping younger generations create a plan to own a home in the future when it is feasible. After all, if we fail to plan, we plan to fail.

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Waiting for our Pre-COVID World to Return will be the Death of Innovation

By Jaedri Wood

Now that we have passed the one-year mark since the COVID-19 pandemic began, posts ‘from this day one year ago’ have surfaced  on social media—bringing back the nostalgia of our “normal” lives. While some may wish for their personal livelihoods to return, the pandemic presents an opportunity to embrace and adapt to change and how we serve our clients. Although we have had to pivot in many aspects of how we interact with those around us, the truth is that the pandemic has improved many ways in which we do our jobs.

Make no mistake, the desire for travel and worry-free gatherings are reasonable to miss from our pre-COVID days. But waiting for a post-COVID world, as it relates to business, is detrimental both on and off the balance sheet. Let us unpack this.

The death of the office-bound workplace has been a long time coming. Since the dot com bubble popped in the 1990s, team members realized that much work could be done via phone or internet. In-person work became part of a routine instead of a necessity. Now, more than ever, people have realized that available technologies make remote work more accessible and successful for thousands of team members. The pandemic has set the stage for innovation—companies have shifted to remote work, digital meeting platforms are the new office water cooler, and technology is being pushed to do things better, faster, and for more people than ever before. COVID made the need for change exponential, and companies have the choice to either excel and innovate or hold onto the past in the hopes that the normal we came to rely upon will return.

A new study from the McKinsey Global Survey, surveyed executives from across the world to understand how COVID-19 altered their business practices. The responses found that “[r]espondents are three times likelier now than before the crisis to say that at least 80 percent of their customer interactions are digital in nature”. Customer-facing companies had to upend their entire business model to accommodate the new demands brought about by the pandemic. Some companies met the demand and adapted, while others have not. The same McKinsey survey reports that companies have accelerated the digitization of their customer and supply-chain interactions and of their internal operations by three to four years. Funding for technological advancements now exceeds any other initiative to date. The moral of this story: when companies are faced with a challenge, innovation is the key to prosperity. Had companies ignored the popularity of digitization and not chosen innovation, the consequences would be catastrophic.

Innovative companies not only recognized industry trends but implemented tangible change in their business practices. For example, remote work due to COVID has spurred positive change in mitigating bottlenecks in businesses. McKinsey asked respondents (pre-COVID) how long it would take to execute a change in their business. These changes ranged from increasing remote collaboration capabilities to increasing spending on data security. Prior to COVID, implementing these changes would take one year. Now, results show that the work from home structure significantly increased speed to delivery, averaging 11 days to provide a workable solution to the proposed change. How is such a dramatic shift possible? Laser focus on the need and outcome. Fear of losing your edge in the industry. Empathy for team members and the responsibility to retain customers, happy customers. Even during a pandemic, dedicated companies have found ways to thrive and persevere.

2020 was a year of volatility and uncertainty. 2021 remains volatile but brings with it a new mindset of forging a better future because the pre-COVID normal is simply outdated. Remote workers have adapted, zoom calls are aplenty, and life continues. There is no “returning to normal”. Right now, we are in a stage of growth where businesses can choose to view themselves as being buried or being planted—ready to grow into something new. Innovation and creativity are not confined to an office or zoom meeting. Indeed, personal interactions are missed, but they are no longer imperative. Now is the time to analyze and see what can be done better in the short and long term. At Phoenix, we push the boundaries; we refuse the norms and are constantly strategizing for what could be the next disruptor to our industry and how we are going to help our clients face it head on and thrive. After all, the only way to innovate is to look outward and forward.

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Random Acts of Kindness

By definition, a random act of kindness is a non-premeditated, inconsistent action designed to offer kindness towards the outside world.

When we asked our team what a random act of kindness meant to them here is what a few  said:

  • Doing something for someone without expecting something in return.
  • Kindness is the sacrifice of selflessness for another or group of others.
  • Helping those in need or someone who needs a smile.
  • Selfless acts of beauty, compassion, or niceness.
  • Good deeds should be done with intention, not for attention

We see it now more than ever, people doing kind things out of the goodness of their hearts and without provocation. When you are out or even on the phone with a customer service representative, sincerely thank them for addressing your concern. Write a letter to the General Manager of a restaurant letting him/her/they know that your experience was great because of the team members.  Next time you see a member of our military, pay for their meal as a thank you for their service. Tipping people in the service industry and extra 5-10% could help them pay an extra expense that month. Let someone cut you in line or give away that primo parking spot at the shopping mall. Shopping local can help save a local ‘mom and pop’ shop. These things matter and impact not just the recipient, but you as well. Even the smallest act of kindness can make a big impact on a person or group of folks. Be kind today and always.

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Get to Know Your Customers

Today is “Get to Know Your Customer Day”!

At PhoenixTeam we are laser focused on knowing our customers, understanding their desired outcomes and aligning our work so that we can help them achieve the value they seek. We avoid overpowering our customer. We listen, a lot and all the time. We incorporate our customers culture, color, and style into our work.

Here are the rules we live by:

1) Help solve our customers most complex problems.

2) Create success by working directly with our customer.

3) Create lifetime value with authentic engagement.

4) Know our customers by understanding their mindset

5) Deliver delightful, lovable products

Our team members have a rare combination of expertise and management ability. Our courage, confidence, and creativity distinguish us from other consultants. We help our clients find the right path to achieve their goals.

We deliver outcomes.

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Top 3 Things Mortgage Servicers Must Do to Stay Competitive

With two of the nation’s top mortgage servicers recently announcing they will sell their remaining mortgage servicing rights in 2017 to focus on more profitable business lines, we are seeing a continued shift toward consolidation in the mortgage servicing industry. The servicers who remain need to act to stay competitive in this era of higher regulation and costs.

According to the latest MBA Servicing Operations Study, the cost of servicing a performing loan is $181 per year, three times higher than in 2008. For non-performing loans, the cost is a staggering $2,386 per year, five times higher than in 2008. So, what should mortgage servicers do now to lower costs and stay competitive?

1. Take a hard look at your processes.
The end-to-end mortgage servicing process is highly complex and constantly changing to comply with new regulations. Have you gotten bogged down with endless quality assurance processes? Is your loss mitigation team not talking to your foreclosure department? Do an honest assessment of your servicing processes to find ways to trim the fat, close holes, and reduce siloes.

2. Optimize your servicing technology.
In its June, 2016 special edition supervision report, the Consumer Financial Protection Bureau (CFPB) warned that servicers are using “outdated and deficient servicing technology,” and that servicers should make improvements to their information technology systems to improve their compliance positions.

To keep costs down and avoid financial and reputational risk resulting from regulatory non-compliance, you need to double down on technology. Does your servicing technology automate workflow wherever possible? Does it include built-in functionality for regulatory compliance? Does it minimize the need to manage processes “outside the system”? If not, invest in these types of enhancements as soon as possible.

3. Squeeze the most out of your technology investment.
With any IT investment, the odds of completing your project on time and on budget are slim. In many cases, IT projects fail to realize business value due to poor requirements or lack of resources.

One way to increase your chances of success is to bring in the right team to help. Successful IT project consultants align your IT implementation with business value, define the right business requirements up front, and manage your project successfully using an “eyes on the prize” mentality. They can provide the temporary lift you need to get a big IT initiative across the finish line.

In this era of consolidation and regulation, being a profitable mortgage servicing operation is harder than ever. We’ll be watching closely in 2017 as mortgage servicers ponder that famous question: “should I stay or should I go now?”

Phoenix Oversight Group specializes in lifecycle solutions including software product management and solution delivery.

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Quotes that Inspire Us

There’s a way to do it better.

Find it.

— Thomas A. Edison

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