Editor’s Note:Dennis Fassettis a former corporate finance executive turned real estate investing “Cash Flow Mercenary.” Dennis specializes in single-family and multi-family cash flow properties and thoroughly enjoys assisting his fellow investors with their own strategies, includinghow to buy your first apartment building.
As an ongoing contributor to Mogul’s “Market News Updates,” Mr. Fassett provides us with his own unique, lively, and thought-provoking commentary on the timely industry news and events of today that are impacting our industry. And be sure to check out his other super-helpful Market News Updates. For now, enjoy...
From Dennis Fassett, Cash Flow Mercenary...
Are you as tired as I am of hearing pretty much every marketer on the planet try to figure out a better way to kiss the tushes of millennial buyers?
I read an article that basically said to "make it personal and customized” because it’s all about them. How so? Well, the article mentioned three ways including… “millennials want to know a company is paying attention to their specific needs,” and “one size does not fit all,” and you need to “earn millennials’ business by doing good.”
Yeah. That’s a lot of hoops to jump through, isn’t it?
Well when it comes to real estate, I have good news for you.
Forget about millennials.
That’s right. Buh Bye…because they’re not your target market.
You see, those under 35 have seen the biggest decline in home ownership since 2008, with a 12% drop to only 36%. And first-time buyers accounted for about 33% of home purchases this year, the lowest share since 1987.
So millennials are pretty much invisible in the market. And their rate of home ownership is continuing to decrease.
Not the group of buyers you want to build a business around, are they?
The Niche to Focus On
But there’s another group that is highly visible in the market. Let me tell you about them:
• The home ownership rate for this group has remained at 80% while dropping for every other age group
• They have less mortgage debt than other groups of homeowners
• They have more wealth than they had four years ago
• They were more likely to have paid off their mortgage
• They are less likely to face a job loss
• They are better positioned to reap gains in the rising stock and bond markets
• And the biggest jump in buyers this year versus any other group
In contrast to picky millennials, this sounds like a group of folks to do business with, doesn’t it?
Well hold on to your hats. Because this group is your parent’s generation.
That’s right. Senior citizens. Geriatrics. Blue hairs.
This group runs rings aroundmillennials.
Another article I read said that "older homeowners have emerged as the pillar of the housing market following the collapse in 2008."
“This group has been a ballast for the market,” said Chris Herbert, acting managing director at the Joint Center for Housing Studies at Harvard University. “If not for them, we would have seen a much lower home ownership rate overall, more homes on the market and more weakness.”
In addition, the median net worth for those 65 to 74 increased 5% to $232,100, the biggest gain for any age group, from 2010 to 2013, according to the Federal Reserve’s Survey of Consumer Finances.
“They have a quadruple bonus -- they benefited from real estate, the best in equity and bond returns, plus higher GDP per capita growth well before the crisis during the 1980s and 1990s,” said Amlan Roy, head of global demographics and pension research for Credit Suisse Group AG’s investment bank in London.
This Niche Keeps Getting Better
The interesting thing is that the percentage of older homeowners with mortgages has increased in the past decade, as has the amount they owe, partly because of refinancing and making smaller down payments, the Consumer Financial Protection Bureau said in May.
In 2010, about 40% of those older than 65 were making house payments compared with more than 70% of homeowners age 50 to 64, according to a report earlier this year by the Joint Center for Housing.
As home prices have increased 21% since 2012, more older Americans are able to sell and buy another home rather than rent. The biggest jump in buyers this year was for the 65- to 74-year-old group, rising to 13% from 10% of all buyers from a year earlier, data from the National Association of Realtors show.
Why are we seeing this? Because to them, being a homeowner means stability rather than changing rent payments.
So – they have higher net worth. They have equity. And they’re a hell of a lot less picky than millennials.
Sounds like the niche trifecta to me.
Whatcha Think?
Will you be passing on millenials after reading this? Talk to me in the comments section below.