How To Help Gen Z Combat The ‘Vibecession’

Despite low inventory, higher interest rates, and a host of other challenges, don’t count Gen Z out of the homebuying market just yet. In 2023, the 27.8% homeownership rate for adult Gen Z-ers was higher than the homeownership rate for both millennials and Gen X-ers when they were 24 years old.

When asked about the so-called “vibe-cession” — the general pessimism young adults seem to have about their overall economic prospects — Todd Potter, senior vice president of mortgage services for Interra Credit Union ($1.9B, Goshen, IN), says it’s all relative.

“Young adults lean on their own experiences,” Potter says. “Were their parents impacted by the Great Recession or face a foreclosure? Or did their family make it through OK from a homeownership standpoint? That informs how they see their situation today.”

Affordability And Education Are Key To Homeownership

Indiana’s affordability has underpinned population growth and enabled Interra to serve more first-time homebuyers. In fact, the shop wrote approximately 25% of all its 2023 mortgages to members between the ages of 25 and 34.

“The median home price here is $215,000,” Potter says. “That means half of the homes we help finance fall below that.”

In fact, home prices in Indiana are so affordable that Interra has noticed an uptick in younger members selling their homes after a life event supports an upward move. The trend has become so prevalent that the credit union recently began providing education on first-time home selling in addition to buying.

“For us, it starts and ends with education,” Potter says.

The credit union offers general education sessions on homebuying at its corporate office and in third-party locations to target different demographics, including first-time buyers, Spanish speakers, and the large Amish population within its service area.

Interra has conducted this education in-person to date but is looking for virtual options to spread its message further and deliver bite-sized chunks to would-be homebuyers.

“An educational library with short videos would allow us to talk about specific topics like the difference between pre-qualification and pre-approval and why you shouldn’t make any major moves from a credit standpoint while shopping for a home,” Potter says.

… But Products Matter, Too

Interra launched a first-time homebuyer, zero down mortgage a couple of years ago. The credit union holds the loans in portfolio, which allows it to waive private mortgage insurance — even with a 100% loan-to-value — and allow buyers who meet credit-qualifying requirements to borrow funds to pay for closing costs. However, Potter notes many consumers can secure conventional financing with as little as 3% down.

“The idea that you need to put 20% down just isn’t the case,” he says. “Other options are readily available.”

Beyond expanding education and promoting its own portfolio products, Interra also is heavily involved in initiatives backed by the Federal Housing Finance Agency for first-time homebuyers.

“As an industry, we should all be promoting the Fannie Mae, Freddie Mac, and FHLB programs that are out there to provide rate reductions and downpayment assistance,” Potter says.

According to the SVP, informing members about these types of programs can be life changing. And even in a hotly divided political climate, homeownership is an issue around which everyone can rally.

“Housing is bipartisan,” Potter says. “Both sides of the aisle want to promote homeownership because it works for everyone. It’s great for families and communities. As we advocate for our industry, highlighting how we’re helping create new homeowners is important.”

Doubling Down On First-Time Homebuyers

For years, Lake Michigan Credit Union ($14.3B, Caledonia, MI) has viewed its mortgage marketing efforts as a three-fold solution serving purchase, refinance, and first-time homebuyers’ needs.

“First-time homebuyers are often on different journeys and need to be nurtured over a longer time period,” says Christi Cowdin, LMCU’s senior vice president and chief marketing officer. “Coming out of the pandemic, we doubled down on our efforts with first-time homebuyers.”

Those efforts are paying off. Like Interra, approximately one-fourth of LMCU’s mortgages in 2023 went to members 25 to 34 years old. Its first-time homebuyer outreach includes workshops across its 72-branch network that shine a light on the ins and outs of homebuying and break down common myths. And, recently, the credit union has expanded its mortgage-related topics to include construction workshops to ensure borrowers know about the options available in a lower-pressure environment.

It’s intimidating to call a loan officer as your first step,” Cowdin says.

First Timers And Low-Income, Too

LMCU offers mortgage solutions to meet the needs of not only younger borrowers but also low- to moderate-income ones and others. For example, it developed a 3% down Community Edge Mortgage for educators, first responders, medical, military, and government professionals.

The Michigan-based cooperative also offers several 0% down products, including one with geography-based qualifications through low- to moderate-income and majority-minority census tracts. And, it launched a  downpayment assistance program this fall to combat the racial homeownership gap. This $1 million special purpose credit program aims to help 100 minority homeowners each qualify for $10,000 of downpayment assistance. Borrowers can even combine the LMCU-funded program with other assistance, such as HomeBoost from the FHLB of Indianapolis.

“Recently, we had several members who qualified for both our $10,000 home assist program and $25,000 through HomeBoost for a total of $35,000 in downpayment assistance,” Cowdin says. “That’s a very big deal.”

Meeting Younger Members Where They Are

In addition to in-person workshops, LMCU will soon launch a new series of educational videos on its YouTube channel to prepare younger borrowers to become homeowners.

The credit union’s “Crash My Closing” monthly social media feature is another way it connects with a younger audience.

“We literally surprise a first-time homebuyer by showing up unannounced at their closing to celebrate them,” Cowdin says.

The series shows young people are still out there buying their first homes, and other young adults watching the videos can, too.

As LMCU tracks its impact, helping first-time homebuyers on their journey is an important measure of success. For example, 60 members became homeowners after working with the credit union and using its Credit Xpert platform, a tool that helps previously unqualified applicants meet lender requirements.

“Even though it’s a challenging environment for first-time homebuyers, we’ve got programs to help younger borrowers go from renting to owning,” Cowdin says.

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