The traditional world of real estate needs to prepare for the next wave of investors – Millennials. Currently ranging in age from 18 to 34, and numbering roughly 77 million, Millennials make up about one-fourth of the U.S. population – and are far less interested in traditional investing or banking options compared to other generations. According to a survey of more than 10,000 Millennials, 71 percent would rather go to the dentist than listen to what banks are saying. That’s a lot of teeth cleanings!
On a more serious note, this alarming statistic means traditional investment agencies, such as banks, need to prepare for the sheer fact that Millennials have very different investment preferences than prior generations. Over the next five years, the purchasing power of Millennials is expected to increase 133 percent from $600 billion to $1.4 TRILLION.
Additionally, Millennials are the best-educated group of young adults in U.S. history and now make up the largest generation in the workforce, meaning in a few years they’ll be ready to purchase homes and start making significant investment decisions. As Millennials enter their peak home-buying years, this could lead to a surge in home sales.
Traditional real estate has primarily been an “offline” industry. Baby Boomers and Generation Xers would often use traditional banks to secure a loan when buying a residential or even commercial property. The old school way of investing will begin to fade as the investment approach of choice for the Millennial-generation shifts.
Here are four key things the real estate industry should note in order to be prepared for Millennials:
Technology is a way of Life
Millennials grew up using technology – they’re the first generation of digital natives – making them open to using it across all aspects of their everyday lives. They’re also the most willing to spend money on innovative products that make their lives easier. Millennials bank online and through their phones. Most report that a trip to the bank is a waste of time as they would prefer to sit at home or a local Starbucks and search for investment opportunities on their smartphone, laptop or tablet. Additionally, Millennials are turning to their online networks when making purchasing decisions. Real estate entities that stay offline stand the chance of missing a significant number of these opportunities. It’s important that the real estate industry step up their online presence and begin creating services that will meet Millennials’ technology needs.
They’re not fans of Wall Street
Many Millennials were entering the workforce during the 2008 recession leaving them with bad feelings about Wall Street. They see traditional banks as the reason they were unable to get a job immediately upon graduating college. In fact, all four of the leading banks are among Millennials LEAST loved brands. Millennials trust technology more than a traditional institution, and would prefer investing through a credible website or app.
They are optimistic about their financial futures
Millennials are the nation’s most stubborn economic optimists. According to Pew Research, 32 percent currently have enough money to live the lives they want and 52 percent expect to in the future. This means they’ll likely be interested in investing their money somewhere. It’s important for the real estate industry to realize this and provide them with easy platforms for them to invest.
They have different priorities than previous generations
Millennials are getting married and having children later in life than previous generations. They’re also waiting longer to leave the nest.
In 2010, 30 percent of 18-34 year olds were still living with their parents, compared to in 1968 when 56 percent of 18-31-year-olds were married and living in their own household. However, that doesn’t mean Millennials never want to own a home and get married. In fact, 93 percent of Millennials between the ages of 18 and 34 want to own a home sometime in the future, while 70 percent hope to get married someday.
Having been built for and supported by the collective investors, crowdfunding and peer-to-peer solutions are the perfect fit for Millennial investment opportunities.
Most of the current real estate market is stuck in a pre-tech era. As more Millennials join the workforce and continue earning more money, it’s important for the real estate industry to prepare. If we want to keep growing our economy and enhancing our communities, we need to start adapting. Millennials will lead the next generation of Americans so we should make sure we not only understand their needs and preferences, but also start developing tactics that cater to them. Many of these tactics can be as simple as offering investment and real estate apps, making it easy to invest from anywhere using any device. Whatever tactics traditional banks and real estate entities take, they need to prepare for the Millennials as their prime home-buying years are fast approaching.
Jason Fritton is co-founder and CEO of Patch of Land. He originally conceptualized Patch of Land in early 2011 as a means to help rescue parts of Chicago devastated by the real estate crash. Jason has been involved with crowdfunding legislation since the beginning and worked with Congressmen to lobby for the crowdfunding exemptions that were written into the 2012 JOBS Act. Jason guides Patch of Land’s operations, strategy and execution. Previously Jason founded a multi-million dollar business, working in technology project design and procurement in the public sector, managing a major build out for the US Army. Jason studied philosophy & history at Cornell College.