Property Virgins Segment Summary April 2013
Source: 2012–13 MacroMonitor
Between 2002 and 2010, the total number of economic households increased from 117 million to 130 million, but the number of first-time homebuyers—Property Virgins—has remained fairly constant: between 5 million and 6 million households. The number of households that say they are likely to buy a home for the first time in the next two years has declined from 10 million before the recession to 6 million in 2012 (see the April 2013 MacroMonitor Market Trends newsletter). The current combination of exceedingly low mortgage-interest rates and pent-up demand should be good news for mortgage providers. However today's Property Virgins differ from those in 2006 when property values peaked.
Through hard work and fiscal discipline, Property Virgins are on track to follow the traditional American Dream track: marriage, family, homeownership. Overall, they are well educated, with higher-than-average incomes, and are married with children. Demographically, they are not significantly different from first-time homebuyers in 2002.
- The mean age of the household head is 37; 69% are age 40 and younger; three in five are Millennials.
- Over one-third have a household income of $75K or more; median household income is $51,000; the majority (70%) fall into the high-middle and high socioeconomic strata.
- Slightly more than two in five have a college degree or higher, in comparison with about one-quarter of aspiring homeowners.
- Almost three in five are married; about one-quarter have no children at present; one-third have children 11 years of age or younger.
- Although somewhat more than half purchased a single-family home, they are more likely than average to live in a condominium, cooperative, townhouse, or row house; one-third report they live in a suburb of a large city.
Products and Services and Financials
Property Virgins' product-and-service ownership generally reflects the norm for all households. Overall, they have both higher total financial assets and higher liabilities than do aspiring homeowners, suggesting that aspiring homeowners' potential ability to own—to qualify for a mortgage—may also have declined. About one-third of Property Virgins report that they are sophisticated investors, and 60% report that they have become much more knowledgeable in the past several years.
- They are more likely than average to own CDs, educational savings accounts, and salary-reduction plans and less likely than average to own US Savings Bonds, money market mutual funds, and municipal bonds.
- They are more likely than aspiring homeowners to have most types of insurance—with some exceptions: Aspirants are more likely to have individual dental or eye-care insurance and credit insurance—in part, because they are somewhat older (mean age 39) and some of their lenders require credit protection.
- The mean number (including 0) of financial products owned is 23.5—slightly higher than for all households.
Financial Attitudes That Differentiate Property Virgins
Today's Property Virgins have several distinctive financial attitudes that differ from those held by first-time homebuyers a decade ago. The implications for mortgage lenders are several:
- The majority are comfortable doing all types of business on the internet; three-quarters find the internet a good tool for finding financial information.
- They prefer direct delivery channels. They are less likely to care if providers know them by name or chat with them, and they are not particularly interested in building long-term relationships.
- The majority are not interested in obtaining advice.
- Over half resent profits financial institutions make from their business.
- To simplify their financial lives, 41% are considering eliminating relationships, 31% consolidating assets, and 38% consolidating debts.
- More aware than many previous first-time homebuyers about sustainability and social issues, half are interested in purchasing socially responsible investments.
The majority of Property Virgins are financially self-confident; some even border on being overconfident.
- Many see financial-services companies as self-interested commodities providers.
- Although few use financial advisors, those that do are much more likely than average to be looking to change intermediaries.
- Almost one-quarter use a credit union as their primary financial institution; more—over one-third—would prefer to use a credit union as their primary institution; banks currently enjoy two-thirds of their business.
- They are more likely than all households, but not as likely as aspiring homeowners, to use mobile devices to receive account alerts or to make peer-to-peer transactions.
Today's Property Virgins are more than twice as likely as are GenXers to be Millennials and three times more likely than Boomers to be Millennials. Because of their differences, Property Virgins portend a sea change in financial-services use equivalent to that caused by Boomers at the same life stage. Confident and cynical, Property Virgins are largely self-reliant. They distrust financial institutions and blame them (along with Congress) for the recession and its effects: joblessness, stagnant wages, and a slowly rebounding economy—financial uncertainty. Unlike Boomers, who had a positive view of financial services as "tools to help me build my life," many current first-time homebuyers perceive financial-services providers as a necessary evil. It may or may not be possible for financial-services providers to build trust with Property Virgins. At minimum, providers are challenged to demonstrate their value. For example, Property Virgins appreciate well-priced, relevant product offers, rapid response times, and transparency. User-friendly websites are a must, but the ability to reach a human with a question easily is a plus. Many Property Virgins feel entitled to special treatment from providers.
For more information, contact CFD.