A recent report indicates that the mobility of young adults has fallen to its lowest level in more than 50 years! This sort of mobility index measures what percentage of people in an age group move from one place to another. It does not create a direct link to home ownership rates but it is correlated. Folks in their 20s are putting off home buying due to a weak job market and loads of student debt – and they are living with mom and dad. Beyond home buying, this group is delaying marriage and having kids causing some to refer to them as “Generation Wait”.
Among adults aged 25 to 29, only 23.3% moved in the 12 months ending March 2013. This was down from 24.6% during the same period the prior year. In addition, the home ownership rate among adults in this age group has fallen from 40% in 2007 to 34%. This is compared with an overall home ownership rate of 65% (which did drop 3% during the same period).
So what’s this mean for Credit Union’s wanting to be memberlicious with mortgages and how can we help out Mom & Dad and get Junior out of the basement?
Here’s a few ideas:
1. Do you help your members save for a down payment so that when they are ready to buy they have the money to do so? One idea is to create a home buyer savings account akin to the old-time Christmas Club account. Check out this prior blog post for how to make it happen.
2. Do you remember the old “pledged” mortgage asset? Have mom & dad put up their CD as collateral for Junior’s home loan so he can buy a house and get out of the basement. That CD would act as a credit enhancement for the down payment. So if Junior buys a $125,000 starter home and the parents have a $25,000 CD, they use that as collateral. Junior borrows the $125,000 purchase price or most of it and the Credit Union’s risk position is still at 80% or less.
3. Do you offer a program to help them better manage and control their student debt? Private student loans and consolidation loans through Credit Unions are usually cheaper options than those provided by our for-profit friends. Money that members save on these payments can be used towards their housing payment.
4. Do you underwrite non-traditional credit? If Junior has been sacking out in his parent’s basement, not only will he not have a mortgage to verify, but there also will not be a rent verification. How will you underwrite these deals when the member is finally ready to move on out?
Credit Unions need to be thinking about how they can help Generation Wait move past the waiting game and help them prepare to be home owners. Being memberlicious with some “newer” ideas can help them. How else can we make the waiting shorter?