Homebuyers Speak Out
There’s a Lot to be Learned from Homebuyer Behaviors
By Miriam Moore
The dramatic real estate landscape of the past two years has given lenders, servicers and investors the opportunity to see just how directly market conditions can shape homebuyer behaviors and influence their perspectives. And while the surge in buying and refinancing activity came as no surprise to anyone given the extraordinarily low interest rates, it is worth looking more deeply to see some of the less obvious implications of how buyers responded to market challenges and opportunities.
In January 2022, ServiceLink set out to do just that by partnering with Schlesinger Group to survey 1,000 homeowners who had purchased a home within the past five years. The 2022 ServiceLink State of Homebuying Report (SOHBR) provides year-over-year data that reflect generational trends among recent homebuyers, attitudes toward alternative paths to homeownership and the role of technology throughout the process.
Navigating Opportunities and Challenges
As record-low interest rates met record-high home prices in 2021, homebuyers had some tough decisions to make. Some dove into the real estate market headfirst, believing they might never see rates like that again. Plenty of others thought about buying but backed out.
More specifically, 24% of the homeowners surveyed for the 2022 SOHBR said they considered buying a home but ultimately decided against it. High home prices (44%) and low housing inventory (28%) were among the top factors that held them back. That’s quite different from sentiments shared in early 2021, prior to the historic increases in home prices, when only 31% cited high home prices and only 8% low inventory. The primary reason homebuyers said they had deferred in 2020 was that they decided to upgrade their current homes instead (34%).
Year-to-year differences are apparent in the refinance space as well. The majority, 62%, of 2022 SOHBR respondents who refinanced said they did so primarily to secure a better mortgage rate, while only 44% of 2021 SOHBR respondents who refinanced cited the mortgage rate. Instead, more than half (55%) of refinance decisions made were related to borrowers’ desires to make home improvements (only a quarter cited home improvements as a reason for refinancing in 2022’s SOHBR).
In total, 30% of 2021 SOHBR respondents told ServiceLink they refinanced their current home, and 25% in 2022. Some respondents are leaving the door open to the possibility of refinancing in 2022 (23% say they are likely to refinance). When selecting a provider for refinancing, respondents stated they are looking for the following factors: the ability to close quickly (41%), ability to complete most or all of the refinance process digitally (34%), ability to complete the application digitally (33%), positive online reviews (31%), in-person customer service (27%) and recommendations from friends or family (27%).
Leaning into Mortgage Technology
The pandemic helped accelerate adoption of digital mortgage solutions by lenders, servicers and borrowers. Homeowners have expressed their desire to keep that momentum going. More than two-thirds of them (69%) said they used technology to research property listings; they also leveraged technology to take virtual property tours (37%), electronically sign documents (36%), digitally review closing documents (34%) and more.
While the use of technology in these applications has been steadily trending upward over the past several years, the use of eSigning and digital document review spiked last year, as more lenders adopted the technology to support people sheltering in place or limiting their in-person interactions. In ServiceLink’s 2021 SOHBR, 10% of homebuyers said they had eSigned documents and 13% digitally reviewed documents prior to closing; those percentages rose to 36% and 34%, respectively, in the 2022 study.
It is likely that these and other technology solutions will continue to grow in use as they facilitate a smoother homebuying process. Homebuyers across generations and gender say they especially appreciate the convenience/ease of use (72%) and time savings (60%) real estate technology offers.
Embracing the Influence of Millennials and Gen Z
The youngest subset of buyers, Gen Z/millennials (ages 18-40), continue to be a driving force in the housing market: 36% of them bought a home in 2020 or 2021, and 26% say they are likely to purchase a new home in 2022. Additionally, 32% plan to refinance this year.
Looking into their motivations for buying their current home, 42% said they were upsizing from their current home, 21% were taking advantage of attractive interest rates, 17% needed more space to work remotely and 14% bought it as an investment property, among other factors.
What truly sets this group of buyers apart from older generations, however, is their openness to new ideas — 23% would purchase a home without seeing it in person first, for example, and 55% either have, or would be willing, to buy a home at auction. This willingness to buy at auction also came to light as part of another ServiceLink study in late 2021, when 75% of millennials (ages 25-40) surveyed said they would consider buying a home at auction. They and others who said they would consider buying at auction were motivated by potential cost savings and a faster homebuying process.
Fulfilling Homebuyers’ Needs for Education
In addition, homebuyers would likely appreciate specific education about their homebuying options. For example, 30% of respondents are not sure if they would be willing to buy at auction because they do not know enough about the process. They want information that will put them on equal footing with savvier buyers who understand all of their options.
Envisioning the Path Forward
The results of the 2022 SOHBR confirm that homebuyers are strategic in their decision-making process, taking market conditions as well as their own financial standing into account before moving to purchase or refinance a home. Lenders and servicers who understand their thinking and support their needs are in better position to earn their trust and business in 2022 and beyond.
To view the complete 2022 State of Homebuying Report, visit: svclnk.com/state-of-homebuying-report-2022
