August 29, 2023 – The Great Wealth Transfer is Underway


Economic Commentary

The Great Wealth Transfer is Underway. According to, the Baby Boomer generation owns about half of the nation’s $140 trillion in wealth. These numbers have escalated significantly over the past decade because of gains in the stock market and the appreciation of real estate. According to market research firm Cerulli and Associates, recipients of the great wealth transfer will inherit $84 trillion in assets by around 2043, with $72.6 trillion going directly to heirs and $11.9 trillion going to charity.

Coming back to the topic of real estate, according to the Census Bureau, 42% of the homes in the nation are owned “free and clear” – or without a mortgage. And almost 80% of these homes are owned by those 55 or older. Thus, when we previously said that the listing inventory shortage is going to be at least partially solved by the Baby Boomers, these stats support our statement. Many Millennials and Gen x’s will inherit a boat load of money, and some will inherit houses directly.

They may choose to live in those houses, or they may sell them and use the cash to purchase another home. If they are already homeowners, they may sell their present home and purchase a larger home, or they may pay the mortgage off on their home. While there are a lot of statistics published recently regarding how expensive it is to purchase a home, there will be a lot of cash out there available to make those purchases. Here is the point. The great wealth transfer is underway right now. It will pick up steam in the coming years. And this phenomenon will affect the real estate market significantly.

Weekly Interest Rate Overview

The Markets. Rates continued to rise last week, though they eased a bit as the survey period ended – hopefully the start of a new trend. For the week ending August 24, 30-year rates rose to 7.23% from 7.09% the week before. In addition, 15-year loans increased to 6.55%. A year ago, 30-year fixed rates averaged 5.55%, over 1.5% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “This week, the 30-year fixed-rate mortgage reached its highest level since 2001 and indications of ongoing economic strength will likely continue to keep upward pressure on rates in the short-term. As rates remain high and the supply of unsold homes woefully low, incoming data shows that existing homes sales continue to fall. However, there are slightly more new homes available, and sales of these new homes continue to rise, helping provide modest relief to the unyielding housing inventory predicament.”  Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

Millennials are the largest generation in U.S. history. In 2022, the oldest millennial turned 41 years old and the youngest was 26 years old. A common misnomer regarding the millennial generation once was that they were destined to be a generation of renters—avocado toast, anyone? With student loan debt burdens, the scars of the Great Recession, and tight housing inventory, it’s understandable why many reached this conclusion. Despite this popular opinion, millennials are not only interested in homeownership but, as of 2022, the majority of millennials—51 percent—are homeowners, according to Census Bureau data. Many demographic and lifestyle factors point to a generation that is aging into their prime home-buying years. The bulk of the millennials are over the age of 33, nearly half are married and approximately 40 percent have a bachelor’s degree or higher, making millennials the most educated generation in American history. In prioritizing their education, millennials have delayed marriage and family formation relative to previous generations. The delay of these key lifestyle decisions, which are correlated with the transition to homeownership, has translated into a delay in the homeownership rate for millennials compared with their generational predecessors. At age 30, 42 percent of millennials owned homes, compared with 48 percent of Gen Xers at the same age. Over the past decade, however, millennials have significantly narrowed this gap. At age 41, the millennial homeownership rate is 62 percent, while Gen X stood at 64 percent. Millennials’ investment in education is paying off. Higher educational attainment increases earning potential, which in turn boosts house-buying power and increases the likelihood of purchasing a home. Millennials’ pursuit of higher education may have delayed their transition to homeownership, but it gives them a boost now that many are finally making that transition. In 2022, a third of primary home purchases were by people aged 25 to 34, which includes mostly millennials, along with older Gen Zers. Source: First American

ATTOM reported nearly half–49%–of mortgaged residential properties in the United States were considered equity-rich in the second quarter, up from 47% in early 2023. “Equity-rich” means the estimated amount of loan balances secured by those properties was no more than half of their estimated market values. The firm’s second-quarter U.S. Home Equity & Underwater Report said the equity-rich figure stands at its highest point in at least four years. “With home prices rebounding across the U.S., the level of equity-rich mortgage-payers went up from the first quarter of 2023 to the second quarter of 2023 in 45 of the nation’s 50 states,” the report said. The gains followed two straight quarterly drop-offs caused by a temporary slowdown in the U.S. housing market that had threatened to end a decade-long run of price and equity growth, ATTOM said. The second-quarter upturn marked another sign of how the market shift has helped homeowners, as home-seller profits also spiked. “The second-quarter market revival bestowed immediate benefits on homeowners around the nation in the form of better profits for sellers and rising equity for those staying put,” said ATTOM CEO Rob Barber. “Equity levels were high even during the recent downturn, and now they are going back up and better than ever.” Barber noted the market remains in flux and the recent improvement could easily be temporary. “Lots of changing forces are at work affecting whether boom times are really back, especially amid a recent increase in mortgage rates,” he said. “But with the 2023 peak buying season still underway, it seems that homeowners can reasonably expect their household balance sheets to grow a bit more in the near future.” The report also found that less than 3 percent of mortgaged homes in the U.S., or one in 36, were considered seriously underwater in the second quarter, meaning they had a combined estimated balance of loans secured by the property of at least 25 percent more than the property’s estimated market value. Source: Mortgage Bankers Association

Many Americans have made significant inroads in paying off personal debt in the last four years, but at $21,800 not including mortgages, the average debt level is getting in the way of other opportunities such as investing, a survey by Northwestern Mutual found. While the overall average is $8,000 less than it was in 2019 and down $554 from last year, 35% of Americans said they’re either carrying or close to carrying the highest level of debt they’ve ever had, the survey said. At the same time, 43% said their debt is now close to or at the lowest level it’s ever been. At a time of high inflation and economic uncertainty, it’s encouraging to see personal debt levels have held relatively steady year-over-year, and even ticked down a little,” wrote Christian Mitchell, chief customer officer at Northwestern Mutual, in the 2023 Planning & Progress Study. “That said, it can be a slippery slope between manageable debt and runaway debt, so it’s an important time to remain extra vigilant about planning and spending.” Milwaukee-based Northwestern Mutual’s survey included 2,740 online interviews of U.S. adults earlier in 2023. Not surprisingly, the survey found the primary source of personal debt was credit cards, accounting for 28% of it. Car loans, at 12%, were the next most common source, followed by medical debt at 7%, home equity loans at 6%, personal education loans at 5% and educational expenses for children or family members at 3%. And the toll of this debt in 2023 is high. Americans with personal debt on average indicated that 30% of their monthly income goes to paying it off, and 61% of debtors said paying it off is a higher priority than any savings. Thirty-nine percent said they’re putting savings first. Source: Financial Advisor

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