By Mike Bodeen · 16 December 2024
Why the Great Wealth Transfer May Not Be Good News For Many
Every week when it comes time to writing our Market Snapshot, I’ll often write about some topic that’s currently big in the world of real estate. Other times, I start with current local market stats (Cromford Report) looking for trends in the direction of the market. And some days, I begin at ground zero staring at my computer monitor hoping for inspiration to bring something fresh and timely to our hundreds of readers.
And then there is a day like today, when a topic near and dear to my heart finds its way to this article.
Graham Nash (Crosby, Stills, Nash and Young – CSNY) wrote the song “Teach Your Children” in 1968. It exploded in popularity when CSN&Y released Deja Vu album.
Teach your children well
Their father’s hell did slowly go by
Feed them on your dreams
The one they pick’s the one you’ll know by
Don’t you ever ask them why
If they told you, you would cry
So just look at them and sigh
And know they love you
Strange real estate article Mike!? For sure, but at least many of my Boomer brethren will immediately smile and start to sing along.
Aaaah, there’s the segue! Boomers!
In the next 20 years, American Boomers will pass down 84 Trillion Dollars of wealth to the next generations – the greatest transfer of wealth in the history of the world. This money will be invested. Somewhere. Much of it will find it’s way into buying homes.
Merrill Bank (article link below) says this:
Real estate: A core investment for all
“One constant across the generations is real estate. In Bank of America’s survey of wealthy individuals, it was the only investing category to be similarly preferred by both older and younger respondents. While millennials face steep barriers, such as rising interest rates and supply challenges, to buying a first home in many markets, “that’s a for-now story, not a forever story,” Sanfilippo says. The Great Wealth Transfer should enable more of them to become homeowners — or trade up or add a second home — either through inherited property or the funds for a down payment.”
So what’s the tie-in between an old rocker’s song and the great wealth transfer?
We’re already finding it very difficult for low-to-moderate income folks to afford to buy a home. Owning a home has been the greatest proven growth strategy to build wealth for the not-so-uber-rich. My appeal comes from my personal belief that time is not an ally for those who should be owning a home, but who are instead renting.
Money is flooding into our economy as witnessed by the stock market’s record rise. This in turn is why getting inflation down is such a problem, and a big part of that problem are “shelter costs.” One definition of inflation is too many dollars chasing too few goods. As more dollars flow in, inflation will remain stubbornly high, hence high mortgage rates will continue to be a road block to homeownership.
Parents and friends, now is the time to teach (and help) your grown children get into their first home. There are creative loans and subsidies that can be a help. Get with a seasoned veteran mortgage lender to get the conversation going.
Three words: Whatever it takes!
Market data referenced in this article comes from The Cromford Report.