LAS VEGAS-Looking to grow mortgage lending? Target a largely untapped market: young, female buyers.
That's the strategy being recommended by one analyst who believes credit unions have an opportunity to build market share with a demographic the data show have increasingly become homebuyers.
First-time homebuyers make up 50% of the purchase market, according to statistics from the National Association of Realtors. According to Annette Melcher, director of product and business development for MGIC, Milwaukee, not only should CUs be looking to bring into the fold as many young (average age 30) people as possible, one particular segment has emerged as a potential force.
Single females accounted for just 10% of real estate purchases in 1981 and still only 15% in 1995, but that figure increased to 23% in 2010. "Consider making this a target segment," she counseled attendees at the American Credit Union Mortgage Association conference here.
From 2010 to 2020, an estimated 11.8 million to 13.8 million households will be created, or approximately 1.2 million to 1.4 million annually. Melcher said "echo boomers," or the sons and daughters of the baby boomer generation, born 1979 to 1994, will account for the majority of that growth. Minorities will account for 70% of the growth in the same decade.
"The people who came of age in the 1970s thought they knew everything and their parents knew nothing, so they didn't ask for help when it came time to buy a car or a house," Melcher said. "But 77% of millennials seek family input for major decisions. Credit unions should be talking to their parents to see if their kids are buying a home."
More statistics that make millennials an attractive target for CUs: once they feel good about a company, 80% stick with that company, and 90% share their brand preferences online.
Beyond the female demographic, broader data show that of every 1,000 members, 58 will need either to purchase or refi a mortgage each year, a number Melcher said should get the attention of CUs. Opportunities can be found in first-time homebuyers, existing mortgage holders, cross-selling, new member acquisition and using financial advocacy as a strategic advantage.
Melcher noted that banks have identified mortgages and checking accounts as the "stickiest" products, particularly when bundled, meaning credit unions need to up their efforts to attract more mortgage loans. Mortgages, she said, are "more than just a loan," it is part of a holistic strategy.
"Mortgages lead to repeat purchases, cross-sales and referrals, all things that will make a difference on the bottom line," she said. Banks have gotten better at working more closely with third-party partners, which has led to improved cross-selling efforts as part of a more carefully monitored mortgage-servicing process, according to Melcher.
Strengths That Go Unused
Credit unions have "inherent strengths" in long-term relationships and their dedication to serving members first and selling to them second, Melcher appraised. But that strength goes unused when credit unions don't fully leverage what they know about their members.
"Some credit unions feel it is creepy or Big Brotherish to use data mining, but the information will not be used against the member, it will be used to help the member," she said. "Credit unions need to build awareness of products and services. Proactive communication should not be not limited to Twitter and Facebook, the staff needs to be proactively talking to members and discovering their needs."
