Social events like mixers and parties could be a good way for credit unions to attract young couples unsure about how to apply for their first mortgage.
A few credit unions have already taken this route with some success, especially in targeting millennials. Many in this age group are now buying their initial homes, and social events are a relaxing and comfortable way for them to learn the nuts and bolts of the mortgage process.
Given that mortgage rates have been falling in recent months and are lower now than they were for all of 2018, this could be a good time for millennials and others to consider purchasing their first home.
“We find younger buyers want information and guidance,” said Lisa Peters, mortgage services manager at the $160 million-asset AurGroup Financial Credit Union of Fairfield, Ohio, which hosts home buying seminars at a local brewery. “There is ample information online, but younger buyers know when it comes to something as important as buying a home – a good review from Yelp isn’t going to cut it.”
The national homeownership rate rose to 64.8 percent in the fourth quarter, up from 64.2 percent a year prior, according to the U.S. Census Bureau. This increase was attributed mostly to more millennials becoming first-time homebuyers. Individuals born between 1981 to 1996 are considered to be millennials, according to Pew Research Center.
For people under the age of 35, the home ownership rate rose to 36.5 percent in the fourth quarter, up from 36 percent a year earlier.
Lower interest rates should further drive home sales, sources said. Since December 2018, rates for a 30-year mortgage have fallen to 4.4 percent, said Tian Liu, chief economist at Genworth Mortgage Insurance.
Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association, said that this year’s retreat in mortgage rates – down more than 50 basis points since November – is good news for first-time buyers looking to close on a home this spring. He expects mortgage originations to rise 4 percent in 2019, with first-time buyers playing an important role in that increase.
“While we still expect mortgage rates to climb somewhat higher later in the year and level off around 4.9 percent, the good news is that overall affordability conditions are improving,” Kan added.
All of this means there could be more mortgage origination opportunities for credit unions, especially for younger members. Some credit unions are being creative in how they reach this demographic.
Michigan State University Federal Credit Union in East Lansing started hosting mixers, complete with food and alcohol, in May 2017 to educate first-time homebuyers on the process. Many members who haven’t bought a home before want to speak with a mortgage officer to understand the origination process and requirements, said Deidre Davis, the $4.2 billion-asset institution’s chief marketing officer. These mixers can help with that.
That first event had 40 participants and resulted in 26 new mortgages, Davis said. The credit union has since hosted two more of the events and has another one planned for April.
Through the program, the credit union has booked 324 new mortgages, and its mortgage portfolio had increased by more than 8 percent in December from a year earlier.
“We recognize that buying a home can be a confusing and stressful time for buyers, whether it’s the buyer’s first home purchase or fifth, so we wanted a way for first-time homebuyers to ask their questions and meet reliable professionals in the home business in a relaxed, fun, and stress-free environment,” Davis said.
Naveo Credit Union in Somerville, Mass., a suburb of Boston, has hosted three workshops called “Hops & Homebuyers” since June at Aeronaut Brewing Co., a local brewery, as a way to attract younger members.
The workshops are promoted via social media, email and Aeronaut’s own event calendar. Attendees learn about preparing for a mortgage, the application process and saving for a down payment, among other things, and receive a coupon for $500 off closing costs, which is good for one year after the date of the workshop.
“In our geographic location, the millennial population is booming due to the local colleges [and] universities and career opportunities,” said Raquel Sa, marketing manager at Naveo Credit Union. “This is just one of many ways we try to engage and connect with the younger demographic in our neighborhoods.”
The $131 million-asset Naveo created this initiative as a “unique way to educate our local community on the home-buying and financial process, which can many times be daunting for first-time buyers,” Sa said.
“It was also a great way for us to connect with younger members who appreciate local craft beer,” she added.
Scott Toler, president and CEO of the Credit Union Mortgage Association, applauds these efforts by credit unions and would like to see more institutions do them. He commented that young consumers like to do research before obtaining a mortgage.
“These first-time homebuyer seminars are a great way to reach all buyers,” Toler said.
Still, there are pitfalls to avoid with such workshops. For one, credit unions need to ensure they fully market these programs to guarantee attendance, Toler said
“Oftentimes there are not enough marketing efforts put forth in marketing so as a result attendance could be better,” Toler added. “But when marketed properly these seminars are effective.”
Results could be slow to materialize as well since some of the participants may be just beginning the home buying process and not ready to commit. So far, Naveo has received several inquiries and leads after its sessions and has since closed on one mortgage as a direct result of the workshops. The events, though, have been “well attended” with positive feedback, Sa added.
“Keep in mind, this is also a first-time buyer workshop so many times attendees are learning about the process and not yet ready to purchase,” Sa said.
Sa also recommends against pushing the credit union’s products and services on attendees during such events.
“Our approach is focused on education and providing people with the information they need to make good financial decisions,” Sa said. “We offer information about Naveo to our attendees, but there is no hard selling or push. We hope that by providing them with the knowledge they need to make such an important purchase that they would come to us when they are ready to buy.”
