A Homebuying Calculator for Millennials: Does That Add Up?

(Bloomberg) -- The real estate industry has spent the better part of the last decade worrying about the buying habits of millennials. Their preference for big cities, tendency to marry later, and bulging student debt are sometimes blamed for the generation’s slow entry into the housing market.

Now that millennials have gained a toehold in the U.S. housing market, Zillow Group Inc. has come up with a new way to sell them homes—a little help with the math.

The Seattle-based online real estate company on Tuesday is launching a new portal designed to help first-time homebuyers navigate the process. Called RealEstate.com, it works a lot like Zillow’s flagship site, with a search tool for browsing listings by price and location, and ads promoting specific properties and real estate agents. (Zillow acquired the enviable domain name when it bought Trulia for $2.5 billion; Trulia got the URL in an earlier acquisition of the software company, Market Leader.) 

The main difference is that the new site is built around a budget calculator that computes mortgage payments, property taxes, and other carrying costs and crunches them into a single monthly bill. The idea is to let users make an easy comparison between the cost of owning and renting a home. The website is built to toggle among English, Spanish, and Mandarin in a nod to the diversity of the millennial generation.

“We weren’t setting out to build Snapchat for real estate,” said Jeremy Wacksman, chief marketing officer at Zillow Group. “We wanted to build something utilitarian.”

That budget-centric approach came out of research on first-time buyers, who make up 42 percent of all homebuyers, according to the company’s data. Meanwhile, only 46 percent of buyers close on the first home on which they make an offer. First-time buyers in particular underestimate closing costs and other expenses, throwing a last-minute wrinkle into the buying process, Wacksman said.

It’s hardly the industry’s first attempt to appeal to the generation. For years, the National Association of Realtors has maintained a “field guide” to help agents understand millennial homebuyers. Startups have also taken their shots, often with services designed to resemble dating apps. (See “Tinder for real estate”; “EHarmony for homebuying.”) 

But Zillow’s new site comes at an opportune time. The median age of first-time homebuyers has hovered around 33 for the last 25 years, according to Zillow’s analysis of census data. The Pew Research Center defines millennials as those born from 1981 to 1997; this means that the oldest millennials are 36, and most members of the generation have yet to reach the age at which Americans typically buy their first homes.

Meanwhile, millennial borrowers are having a slightly easier time getting mortgages. Their average FICO score was 722 in the first three months of 2017, down from a high of 727 from August through October of last year, according to mortgage software company Ellie Mae Inc. In other words, they’re able to secure mortgages with a lower credit score.

Mortgage calculators are ubiquitous on the internet. Navigating the home-buying process is often frustrating and complex, but a better user experience isn’t going to solve the bigger problem facing first-time buyers: a shortage of homes they can afford. The inventory of U.S. homes for sale is at its lowest point since 2012, according to a March report from Trulia—a shortage that’s been particularly acute at lower price points.

(Updates with Wacksman's full title.)

To contact the author of this story: Patrick Clark in New York at pclark55@bloomberg.net.

To contact the editor responsible for this story: Peter Jeffrey at pjeffrey@bloomberg.net.