As far as the mortgage industry is concerned, e-closings and emerging millennial homebuyers go hand-in-hand. The thinking goes that these tech-savvy individuals expect greater efficiency and convenience in the home buying process. However, millennials are struggling to enter the market and are not the only ones who are looking for increased closing efficiencies. So, who is controlling the e-closing revolution? The answer is Generation X, especially when one considers its buying power, history with emerging technology, and the fact that several members of this demographic are in executive positions within the industry.
Generation X (ages 37-51) is a resilient group when it comes to buying power. A July 2018 Pew Research Center study indicates that Gen-X was hit hardest by the recession in 2008 and experienced the largest decline in home equity, but through 2016 (the most recent year with available data) they are the only generation to have recovered the home equity and wealth they lost in the downturn and after the housing crash. The study also shows that Gen-Xers are still of prime working age and are approaching their peak earning years. According to a December 2018 Business Insider article by Andy Kiersz, through all 51 jurisdictions Gen-Xers' median income substantially exceeds that of millennials. This results in Gen-Xers having more buying power on an individual basis.
As far as technological ability, Gen-Xers offer unique insights. They remember life without the internet and reminisce about phones being hung on the wall. Many bought their first homes under antiquated paper processes. Now, they have the internet, mobile devices and the beginnings of e-closing technology. As a result, Gen-Xers have a keen understanding of technological advancement and its benefits. Findings from The National Association of Realtors Research Department's "Home Buyer and Seller Generational Trends Report" show that Gen-Xers are not that far behind millennials in using mobile devices and the internet to find a home. Gen-Xers are actually more likely than millennials to use the internet as a first step in the home buying process.
Nevertheless, generational experts, such as James Dorsey from The Center for Generational Kinetics, characterize Gen-X as a skeptical group. That may be the reason why mortgage industry decision makers find it difficult to make the technological leap and partner up with fintech vendors, based on the assumption Gen-Xers (or early boomers) have the most impact as decision makers.
Many within the industry have declared 2019 to be the year for widespread adoption of e-closing and e-mortgage technology, and Fannie Mae has even gone as far as publishing an e-mortgage readiness checklist, touting that "e-mortgages and e-closings are the future of mortgages." The industry is adding pressure to adopt advancing technology, and exhorting decision makers to embrace change to remain competitive. Yet it seems that the Gen-X decision makers may still be more hesitant than they should be.
This perspective shouldn't discount the role millennials play in driving e-closing/e-mortgage adoption. Millennials (ages 20-37) are still heavily influencing the development of e-closing. For example, Altisource, in its 2018 "State of Originations" report, concluded that based on a survey of 202 industry decision makers, increasing automation is critical to capturing the business of millennials entering the market.
A January 2019 article in Fortune dubbed millennials as the "biggest, and still hungriest, class of buyers" also argues that millennials are still being held out of the housing market. There are many well-documented reasons why it is difficult for this generation to actually buy a home: student debt, the gig economy, down payments, being raised during the recession, rising interest rates and supply of affordable housing. In addition, Forbes argues that millennials are actually sinking the housing market, maintaining that millennials don't have any serious qualms with living with their parents and their parents don't mind, which results in overcrowded households, fewer buyers in the market and lost households. However, looking to the future, Freddie Mac deputy chief economist Len Kiefer predicts "as life progresses, and today's young adults age, they will add around 20 million households to the U.S. economy, driving housing demand over the next decade."
Although millennials, as a whole, are larger in number and will be the gold mine in the market for at least over the next decade, they are currently experiencing many roadblocks to homeownership, putting Generation X in the driver's seat when it comes to adopting e-closing technology. Not only do Gen-Xers have the home buying power and technological insights and ability, but they also have more decision makers in the mortgage industry than millennials, and thereby possess supply power in the rising demand for e-closings.
