Several contributing factors have come together to create the perfect Molotov cocktail for major disruption in the Texas housing market. For one thing, people are moving to the Lone Star State in droves. Between July 1, 2015 and July 1, 2016 over 400,000 people relocated to Texas—more than any other state during the same time frame. Additionally, employment rates are on the rise with no signs of dropping. As of May 2017, Texas jobs grew at a 2.5 percent annualized rate, up from an already impressive 1.5 percent the previous year.
As more people move to Texas, demand for real estate in major metros like Dallas-Fort Worth is on the rise—and with it, pressure on real estate and mortgage companies to meet the needs of an increasingly tech-savvy customer base.
Millennials Demand a Different Kind of Home Buying Experience
Millennials make up a large portion of those relocating to Texas. According to a report released by Apartment List, Austin, Houston, and San Antonio ranked among the top 10 cities for millennial population growth from 2005 to 2015. Meanwhile, Dallas’ own Mark Cuban began campaigning in 2017 for millennials to move there, as the city ranks in the top 10 metropolitan areas for highest paying jobs (adjusted to cost of living). Because this segment of the population is reaching its prime home-buying years, understanding their needs is vital for those in the real estate industry.
And when it comes to how they prefer to get their loans, millennials’ desires and preferences differ greatly from their baby boomer parents. The 2016 Zillow Group Report on Consumer Housing Trends revealed millennials are the generation most likely to get a mortgage online, with 56 percent of those surveyed reporting having done so. Millennials value the speed, accuracy, and transparency afforded through online lending options—and dread the paperwork associated with more traditional means of securing financing.
Fintech Makes the American Dream Attainable in Days
Financial technology (fintech) innovation is already transforming the real estate landscape—and is poised to become so powerful, the market five years from now will likely be unrecognizable. The impact of fintech on real estate can be felt from every direction, from investing and purchasing to appraisals and property management. No area of real estate is more in need of disruption than mortgages, where despite the façade of online portals, most lenders are still using the same archaic practices and technology from decades before.
Technology already exists that takes away major pain points of the mortgage application process. For example, with the right tech, people can successfully apply for a mortgage in fifteen minutes and receive approval in as few as seven to eight days—the minimum days required by the government. This represents a drastic cut in the average time it takes to get a mortgage, which is currently 44 days.
Through direct-to-consumer mortgage platforms that cut out the middleman, all portions of the application process can be completed seamlessly online. Instead of arduous paperwork, the online mortgage platform asks an applicant as few as four questions, such as the person’s name, address, phone number, and birth date. From there, the platform pores through public records, confirms the identity of the applicant by asking a series of questions only he or she would know the answers to, and leverages partnership with credit bureaus to confirm credit worthiness in a fraction of the time. In most cases, these four questions are sufficient to complete the application—meaning the applicant can complete the process without ever having to disclose a social security number.
That’s not the future of home loan applications. The technology is already here, and it’s about to take off in Texas.
Tech-Savvy Texas Ripe for Mortgage Origination Innovation
Texas’ steadily increasing population and red-hot housing market aren’t the only factors that put the Lone Star State in the perfect position to disrupt the residential real estate industry. The region is also highly pro-tech, as demonstrated by innovative tech industry giants Apple, Amazon, Facebook, Google, Oracle, and Microsoft—as well as hundreds of fintech startups—moving into the area. Finovate ranks Austin No. 6 on its list of top U.S. cities for fintech development, while Dallas comes in at No. 11.
The home loan space will be an exciting arena to watch over the course of the next few years as millennial residential real estate purchases pick up pace, and mortgage originators embrace the tools and technology required to provide customers with the application experience they will not only expect, but demand.
Mark Greco is president, founder, and CEO at 360 Mortgage Group, a technology-powered mortgage bank.