Blame Millennials for the real estate advertising decline Their penchant for renting instead of buying has mucked up the industry

Tweet

By the editors of Media Life

This article is part of an ongoing Media Life series entitled “The bigger story on America’s Millennials.” You can read previous stories by clicking here.

 

This year, real estate advertising will take a 6.3 percent hit, falling to $25.9 billion, according to a new report from Borrell Associates, the Williamsburg, Va., local ad tracking firm. You can blame the decline on a 6 percent drop in home sales versus 2015. And you can blame that drop in home sales on Millennials. They’re renting rather than buying, the report says, largely because they carry too much debt. More than half of those under 35 are paying off student loans, and another 35 percent are paying down credit card debt. That makes it hard to take on the burden of a mortgage. And when people aren’t buying, realtors aren’t advertising. Kip Cassino, executive vice president of research at Borrell, talks to Media Life about other reasons Millennials won’t buy, other categories that are feeling their impact in advertising, and whether real estate will rebound.

 

What did you find most interesting or most surprising about this report?

Naturally, the continuing decline in digital ad spending among agents and brokers was surprising, but only until three important factors are considered:

1. Realtors have turned away from expensive paid search advertising in favor of far less expensive social media and SEO.

2. Realtors remain starved for inventory. Less housing for sale means less advertising.

3. Now that they have become more experienced with digital advertising, realtors are spending more wisely, just as was the case with newspapers in the past.

 

What’s the most important thing media buyers and planners can take from it?

Real estate advertising levels reflect the nature of business in each market. There is really no such thing as a homogeneous national real estate market – only the aggregation of information from thousands of neighborhoods, towns and cities.

In many of these, real estate activity may be substantially different from what national totals reflect.

 

What has been the long-term pattern for real estate advertising — was it up before last year, did it ever come back from the Great Recession?

Real estate advertising has certainly recovered dramatically from the depths of the Great Recession. However, as long as artificially low interest rates depress the growth of home values, home owners will remain more likely to stay in their current homes if possible.

 

It’s rare to see declines in digital these days. Why will that be down?

What I said above. Only mortgage lenders saw an increase, due to very low refi rates.

 

Can you explain a bit more fully the impact Millennials are having on real estate advertising?

Millennials are now the largest (potential) home buying segment of the nation’s adult population – but only a reduced number of them are buying homes. Leftover college debt seems to be the biggest reason, abetted by difficulty in getting good, decent-paying jobs.

 

Why is this group choosing to rent rather than own? Is that a pattern seen with previous generations of young people?

They choose to rent because they can’t afford the down payments necessary to buy. The last time rent vs. buy patterns approached what is seen now was just after the end of World War II, when sufficient housing was simply unavailable to the veterans returning home and starting families.

 

Do you think the renting tendency will eventually change for Millennials?

It may, if economic growth accelerates beyond current rates.

 

Are there other areas of advertising Millennials are having a similar impact on?

New car purchases, jewelry purchases, furniture purchases and clothing purchases – but to a lesser degree.

 

What’s the general outlook for housing right now? Do you think sales will be down again this year?

The general outlook for housing right now is slow to no growth. Nationwide, permits trail housing starts. However, as stated above, some markets are seeing strong growth.

 

Was real estate quicker to adopt to digital ads than other ad categories? Why or why not?

All the component categories of the “newspaper classified triad” (recruitment/real estate/auto) have been quick to embrace digital advertising.

Even early on, at the turn of the century, the internet offered improvement in messaging, better measurability, and richer content. Recruitment and real estate were the first to do so, and have – to a great extent – quit their historic dependence on newspapers in favor of the web.

Now that digital advertising is shifting from desktops to purses and pockets, this shift is expected to accelerate.