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Millennials don’t trust lenders or the housing market – So how do we reach them?

A social work-inspired approach to guiding first-time homebuyers

One of the most defining characteristics of the Millennial generation’s experience with the financial and housing ecosystems is that of fear.

As a result, they have developed a pervasive mistrust of banks, lenders, and the housing market overall. In one study by Even Financial, 92% of millennials stated that banks could not be trusted, and over half said they didn’t have anyone to turn to for financial advice. 

Kristin Messerli, Columnist

In a recent home buying event in Los Angeles, attendees consistently shared their fears and insecurities about the topic. 

“It’s scary,” said Reina, a 31-year-old homebuyer. “I think in the past there hasn’t been a lot of transparency about the process, and there’s just so many steps that are really intimidating.”

There’s a generational gap in how we think about homeownership and the American Dream.

Access to homeownership for this generation isn’t just about credit. It’s about access to trustworthy advice, transparent information, and personalization. 

The Generational Gap

When I speak on the topic of Millennial homebuyers to groups of loan officers and agents, the audience repeatedly echoes the same disparaging jokes about snowflakes and participation trophies.

I ask them what comes to mind when they think of Millennials, and predictably, in nearly every session, they cite “lazy” or “entitled” as an almost instinctual reaction to the question.

(To be fair, I encourage these comments so as to address the topic, and because I enjoy self-deprecating humor). 

However, it seems like there’s always a new viral article about how avocado toast is “ruining Millennials,” which fuels this sentiment. In Zillow’s humorously patronizing study on real estate trends among Millennials, they cite the reason for our slow entrance to the home buying market as a result of spending money on lavish bachelor parties instead of saving.

As entertaining as that click-bait may be, this kind of commentary reflects a harmful narrative between generations, rooted in two very conflicting experiences of the housing market.

In context, this perception that Millennials are just slacking off when it comes to wealth-building is understandable. For the majority of Baby Boomers, homeownership and a traditional career path translated to safety and security. They bought houses, they climbed the corporate ladder, and now many of them sit in a relatively secure place in our society. Naturally, they are confused when their children are not following their white-picket dreams.  

However, for Millennials, who entered adulthood during or immediately following the financial crisis, homeownership does not necessarily translate to security. In fact, to this generation, the entire system their parents raised them in appears to have crumbled around them, and to a certain extent, they feel betrayed. 

Millennials turned the key to their adulthood and walked into a house full of student loan debt, a collapsed housing market, rising healthcare costs, income inequality that’s at a five-decade high, and to top it off, polar bears are on the decline. (As a former 9-year-old snowglobe collector, that last one really gets me). 

This house of horrors only gets more terrifying for Millennials of color, who make up 46% of the generation. Their families were systematically prevented access to mortgage credit until the ’70s and faced direct and open discrimination from lenders until well into the ’90s.

While white families had at least a three-decade head-start in building wealth through homeownership that they would pass on to future generations, many of the multicultural Millennials today did not benefit from a generational transfer of wealth. When these communities began to build wealth in the early 2000s, they were hit the hardest in the financial crisis, in which their wealth plummeted to levels not seen since before the Fair Housing Act of 1968. 

Millennials of all backgrounds were disillusioned by what they were told was the American Dream, and now they’re faced with a new reality — one which seems to be hardly understood by those with a foundation of wealth built on real estate. 

But don’t order your bottomless mimosas in despair just yet. Millennials are behaving as any community would in the face of traumatic events, and there is a proven method to connecting with this exact type of audience.

An Alternative Approach

As a former social worker, I worked primarily with traumatized, homeless and migrant populations.

Over the years of studying consumer financial behavior, I noticed some similarities. Traumatized populations are highly suspicious, avoidant and often swing between reckless and overly cautious behavior (known as the “fight or flight” response). Sound familiar? 

Social workers use a therapeutic model called Trauma-Informed Care (TIC) that I think is incredibly relevant to rebuilding our approach to a generation of financially stressed and overwhelmed consumers. Similar to a practitioner working with a traumatized child, lenders and industry “practitioners” should understand how to approach today’s consumers in a way that connects and builds trust to support the growth of a healthy society and economy. 

To be clear, I am not saying the financial crisis, systemic discrimination or other factors described here are necessarily classified as trauma (though they are for many). My purpose, for now, is to demonstrate how we can apply a healing modality traditionally used in therapeutic treatments to better connect with modern consumers. 

There are five overarching principles in a Trauma-Informed Care approach, which I have adapted below to apply to financial services and housing.  

  1. Safety: The customer experience ensures the clients’ financial safety, and interpersonal interactions promote a sense of safety as defined by those served.
  • Design the customer experience with the customers’ definition and perception of safety in mind from start to finish. Millennials, for instance, will likely feel the safest starting an application through their mobile phones, but will later appreciate human interaction and guidance. 
  • Offer flexibility in how the consumer communicates and engages throughout the customer experience (i.e. text, phone call, etc.). 
  • If hosting events, offer them in locations outside of the office such as a local coffee shop or pub (the only time to talk about avocado toast), so the participants feel safe to gather information and connect without fear they will be sold to or require divulging their financial situation on-site. 
  1. Transparency: Creating clear expectations with clients about what the home buying process will entail, how they will be communicated with, and offering additional resources for education.
  • Consider offering “homeownership plans” for anyone, no matter their stage in life. 
  • Create and share educational content on social media. 
  • Respond openly to consumer questions with omnichannel accessibility. 
  1. Choice: Offering a clear understanding of their personalized purchasing options
  • Disclosures, contracts, negotiation offers, etc. should all be explained thoroughly and in plain language for the customer to understand their options. 
  • Lenders should ensure clients can independently review their available mortgage products, understand the rate and associated fees, and be able to view various scenarios based on their personal preferences (i.e. down payment, product choice, etc.). 
  1.  Collaboration: Access to a trusted advisor to support smart decision-making
  • Offer quick responses to questions and inquiries.
  • Provide live video or in-person support when reviewing major decisions in the home buying process (i.e. contract, mortgage product). 
  1. Empowerment: The recognition of the consumer’s ability to self-advocate and achieve long-term financial wellness
  • Empower the customer with education and resources to continue to build wealth and a sustainable future as a homeowner.
  • Provide opportunities for the customer to share and advocate on your behalf (i.e. digitally shareable financial education resources, photos and social media posts at closing, etc.).

The trauma-informed care model is used by countless providers to build trust with the most distrusting populations, and it only makes sense to apply it in the context of a distrusting consumer segment. 

Reaching this generation of homebuyers requires the housing industry to take a new approach that empathizes with their worldview and empowers them to build their version of the American Dream.

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