The housing industry is certainly subject to major changes based on the short term, but it is also in the best interest of lenders to be knowledgeable about long-term planning. Understanding long-term impacts of various factors can help lenders not only plan for the present but also for the future. Many experts in the industry find it valuable to look as far ahead as ten years in order to determine the path of their current actions. So, what changes are happening now that could lead to planning opportunities?

According to research conducted by Fannie Mae, baby boomers and millennials will be two of the most important factors influencing the future of the housing industry. In fact, Fannie Mae is narrowing in on the expected impacts from these sectors of the population with additional research. Minority home ownership, too, is likely to be a big player in the future of home loans.

What Millennials Mean

One of the biggest concerns across the housing market today has to do with the millennial generation. This generation has not participated in the process of purchasing a home during recent years, likely due to the delayed effects of the great recession. Many of the individuals falling into this age category are underemployed or recovering from long periods of unemployment. Despite these numbers indicating a reduced ability to own a home by the millennial generation, many renters reported in a recent survey that they would prefer to own a home if they had the financial resources to do so. Most of those renters were millennials, showing promise and interest going forward.

What this means for the housing industry is that lenders should be prepared innovate their offerings. While this certainly doesn’t necessitate a return to the old way of doing things with regards to looser lending standards, it does warrant a review of existing lending practices to determine what changes could be made to allow this generation to become homeowners.

The Baby Boomer Impact

Baby boomers, too, are an important feature of determining the long-term picture for the housing market. Unlike millennials, who are hoping to grow into bigger homes and be able to obtain the loan necessary to do this, baby boomers are frequently looking to downsize. These baby boomers may be making the jump from suburban homes into townhomes, condos, or patio homes that require less maintenance and have less square footage overall.

Housing Growth for Minorities

Baby boomers and the millennial generation are not the only groups that will influence the mortgage industry. Minorities are also expected to increase housing ownership over the coming decade. While minorities accounted for just over 70% of home sales growth in the last decade, this number is expected to grow to approximately 75% in the coming five years. Lenders should be aware of how increased minority interest and ability to purchase will influence home loans being taken out. One way for lenders to incorporate this into their long-range planning is to think about the financial constraints that affect many of these households.