Defying the stereotype that they are all downsizing or relocating to retirement communities, the baby boom generation is making a significant impact on the housing market. Rather than taking a back seat to millennials and Gen Zers, baby boomers are taking charge and opening back up as a prospective market for originators. The generation is the largest pool of homebuyers at 39%, according to the National Association of Realtors (NAR).
Jessica Lautz, deputy chief economist and vice president of research for NAR, says numerous factors are impacting boomer homebuying rates. “People are living longer and that, in general, is definitely impacting the way that they approach homeownership,” Lautz said. “Some boomers are also not necessarily downsizing. Maybe they’re looking for a single-story home or a new build that makes it easy for them to customize the home’s accessibility functions. And they save time and even money by not having to remodel their current home.”
Lautz also said that many baby boomers have excess cash for homes and could even skate past a mortgage. “[Their] housing equity in the last few years has opened up as home prices have increased,” she explained. “But their main reasoning isn’t money, it’s a desire to be closer to friends and family and enjoy retirement.”
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Serving the Seniors
Tapping into equity is achievable for most boomers, according to the Center for Retirement Research at Boston College. However, serving those boomers (people born from 1946 to 1964) has proven difficult. A study, released earlier this year, suggests borrowers are more likely to be rejected for a mortgage the older they get. The study alleges that age goes hand-in-hand with race and ethnicity as being equally important when it comes to mortgage approval. The study concluded that age increases rejection because “having a borrower die can be costly to the lender, because it increases the likelihood of the loan being paid off early (prepayment risk) or entering foreclosure (default and recovery risk).”
That’s why Adam Huebner, co-founder of Advantage Reverse Lending, says that with making sure seniors are properly reached comes a holistic approach to their situations. Huebner formerly worked as a sales trainer and mortgage professional at American Advisors Group (AAG), which specializes in financial solutions for retirees. His first step when consulting with a new senior customer is to listen first and hold off giving advice until he knows the goals of that customer.
“You need to learn about their situation before predetermining what they want. Listen and understand what that person is trying to accomplish, and from there it’ll be easy to find a product that will make the most sense for them whether it’s a HELOC [home equity line of credit] or reverse,” he explained. “It’s my goal to help educate and help them understand what else is out there, and if for some reason my products don’t align with their goals, I can direct them in a different way.”
“Some boomers are also not necessarily downsizing. Maybe they’re looking for a single-storey home or a new build that makes it easy for them to customize the home’s accessibility functions.”
Jessica Lautz, deputy chief economist and vice president of research, National Association of Realtors
Some questions that Huebner recommends asking are whether they plan to stay in the home for the rest of their lives, downsize altogether, or get access to short-term cash to fix up their current home. “My goal is to prepare the person from present day to whatever the endpoint is and help them have flexibility, control, and confidence in their home decisions,” he said. “Other questions to ask are if their kids know about their plan, how much can they afford, what is their goal with their home, and is there anything their current house needs to be redone to make it more comfortable for them to continue living in.”
Luckily, Huebner says that it doesn’t always winnow down to a reverse mortgage. Senior buyers may take on a HELOC or a short-term loan which would allow them to fix up their places. Some may even venture into another 30-year mortgage altogether. “There’s a big difference in an older buyer’s mindset when it comes to mortgages,” Huebner explained. “Younger buyers like Gen Zers and millennials are accumulating wealth, but seniors have a different mindset where they’re in a wealth distribution phase, and they’re trying to figure out how to best manage that wealth that they’ve spent the past 40 years accumulating.”
Sensitivity Approach
Huebner has been in the reverse mortgage space for 11 years and says that he has a personal connection to working with older borrowers. “I saw my grandmother drop from two social security incomes and lose a non-transferrable pension when my grandfather passed away,” he said. “There was a long period where my father had to help her navigate a lifestyle without another income. She had a reverse mortgage until she could refinance, and I remember her telling me shortly before she passed that her life was noticeably different when she was able to save money.”
That’s why Huebner says that it’s important to have sensitive conversations with borrowers about life and death. “Talking about what happens if one income drops off has always been the toughest part of my career,” he said. “But it’s something that needs to be figured out to do the math as to what they can afford. They need to know if they can afford their situation if one income passes on, as hard as that is for them to think about.”
“Younger buyers like Gen Zers and millennials are accumulating wealth, but seniors have a different mindset where they’re in a wealth distribution phase and they’re trying to figure out how to best manage that wealth that they’ve spent the past 40 years accumulating.”
Adam Huebner, co-founder, Advantage Reverse Lending
Talking to seniors about their mortgage options is one thing, but reaching them is another. Huebner recommends connecting with financial planners, in-home care and nursing specialists, and, of course, real estate agents who have clients looking to downsize. “The best advice I can give is not to be pushy,” he said. “Promote yourself as someone who can help educate [seniors] about their mortgage options. You don’t have to be in anyone’s face, but you need to make yourself a resource that is right in front of them.”
Like Huebner, Chris Munson — who is vice president of sales and marketing for Moneyhouse — says that helping seniors is on an individual-to-individual basis. “With a senior, that becomes more so because of the longevity in the home. What originators need to understand is that one loan is not like every other loan,” he said. “You have to consider the application and the situation.”
Sphere of Influence
But education and outreach go beyond sitting down one-on-one with a senior, it also involves educating their circle of influence and those helping them make financial decisions. Nick Rosynek, who works as Moneyhouse’s Midwest regional sales and marketing director, says, like Huebner, that education is what should be at the forefront when it comes to working with seniors. “Reverse mortgages aside, it’s important to ask what their game plan is. You’re advising them based on their situation what they need,” he said. “Education is at the forefront.”
Nick’s father, Ralph, who is senior vice president of wholesale and correspondent lending at Moneyhouse, reiterated that approaching a senior is mostly about education. “You also have to consider how to educate their circle of trust, which is family, their children, their bankers, and even the real estate agents that they’re working with,” the elder Rosynek explained.
“Reverse mortgages aside, it’s important to ask what their game plan is. You’re advising them based on their situation what they need.”
Nick Rosynek, Midwest regional sales and marketing director, Moneyhouse
Munson added, “If you are selling mortgages in an area with a high relocation rate of seniors, you ought to know about what products you can approach them with.”
Presenting options is also key, Munson said. “It’s important to know your market and where they’re at,” the younger Rosynek added. “It’s not always just directly presenting options to the senior. I’m 34 and my father is 69, so how his options are displayed affects us both. And I have friends who have had one parent pass on, and they’re unable to help their other parent because they have three kids themselves. So instead of senior options being framed as last-ditch efforts, they really should be included in all serious financial planning and options.”
This article was originally published in the NMP Magazine September 2023 issue.