The Great Wealth Transfer: A New Era of Opportunity

In recent years, there’s been a significant shift in how wealth is distributed among generations. It’s called the Great Wealth Transfer. Historically, the transfer of wealth from one generation to the next was a more gradual process, often limited to smaller amounts of inheritance or family savings. But today, the scale has increased in a big way. As a recent article from Bankrate says: “The biggest wave of wealth in history is about to pass from Baby Boomers over the next 20 years, and it’s going to have major impacts on many facets of life. Called The Great Wealth Transfer, $84 trillion is poised to move from older Americans to Gen X and millennials. If it’s managed smartly, Americans will be able to grow their wealth and ensure their financial security.” Basically, as more Baby Boomers retire, sell businesses, or downsize their homes, more substantial assets are being passed down to younger generations. And this creates a powerful ripple effect that’ll continue over the next few decades. The graph below uses data from Merrill and Cerulli Associates to give you an idea of how much inherited money is set to change hands through 2045: Impact on the Housing Market One of the most immediate effects of this wealth transfer is on the housing market. Home affordability has been a concern for many aspiring buyers, especially in high-demand areas. The increase in generational wealth is expected to ease some of these challenges by providing future homeowners with greater financial resources. As assets are passed down through generations, buyers may find themselves in a better position to afford homes. Merrill talks about that benefit in a recent article: “While millennials face steep barriers . . . to buying a first home in many markets, ‘that’s a for-now story, not a forever story’ . . . 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.” Impact on the Economy But the Great Wealth Transfer doesn’t just impact housing. It’s also going to provide a new avenue for entrepreneurial spirits to fuel economic growth. If someone is looking to start a business and they’re receiving funds like this, that money can used as the necessary capital to start a new company. This helps the next generation of innovators and business owners bring their ideas to life. Bottom Line While affordability remains a challenge in today’s housing market, the ongoing Great Wealth Transfer is poised to unlock new opportunities. As wealth is passed down and put to use, it’s expected to ease some of the barriers to homeownership and fuel other entrepreneurial endeavors.

The Biggest Mistake Sellers Are Making Right Now

The housing market is going through a transition. Higher mortgage rates are causing more moderate buyer activity at the same time the supply of homes for sale is growing. And if you aren’t working with an agent, you may not realize that. Here’s the downside. If you’re not informed, you can’t adjust your strategy or expectations to today’s market. And that can lead to a number of costly mistakes. Here’s a look at some of the most common ones – and how an agent will help you avoid them when you sell.  1. Overpricing Your House Many sellers set their asking price too high and that’s why there’s an uptick in homes with price reductions today. An unrealistic price will deter potential buyers, cause an appraisal issue, or lead to your house sitting on the market longer. An article from the National Association of Realtors (NAR) explains: “Some sellers are pricing their homes higher than ever just because they can, but this may drive away serious buyers and result in unapproved appraisals . . .” To avoid falling into this trap, partner with a pro. An agent uses recent sales of similar homes, the condition of your house, local market trends, and so much more to find the price that’ll attract more buyers and open the door for multiple offers and a faster sale. 2. Skipping the Small Stuff You may try to skip important repairs, thinking you can pass the task on to your buyer. But visible issues (even if they’re small) can turn off potential buyers and result in lower offers or demands for concessions. As Money Talks News says: “Home shoppers like to turn on lights, flush toilets and run the water. If these basic things don’t work, they may assume you’ve skipped other maintenance. Homes that appear neglected aren’t likely to fetch top price.” If you want to get your house ready to sell, the best place to turn to for advice is your agent. They’ll be able to do a walk-through with you and point out anything you’ll need to tackle before the photographer comes in. 3. Not Looking at Things Objectively Buyers today are feeling the pinch of high home prices and mortgage rates. With affordability that tight, they may come in with an offer that’s lower than you’d want to see – especially if you didn’t stage, price, or market the house well. It’s important you don’t take this personally. Getting overly emotional can put the sale at risk. As an article from Ramsey Solutions says: “Remember, a buyer’s offer is not a reflection of their opinion of your home or your housekeeping abilities. . . The sale of your home is strictly a business transaction. If they start out with a low offer, don’t take it personally and get emotional. Instead, channel that energy toward negotiating. Work with your agent and make a counteroffer.” 4. Being Unwilling To Negotiate The supply of homes for sale has grown. That means buyers have more options, and with that comes more negotiation power. As a seller, you may see more buyers getting an inspection, requesting repairs, or asking for help with closing costs today. You need to be prepared to have those conversations. As U.S. News Real Estate explains: “If you’ve received an offer for your house that isn’t quite what you’d hoped it would be, expect to negotiate . . . the only way to come to a successful deal is to make sure the buyer also feels like he or she benefits . . . consider offering to cover some of the buyer’s closing costs or agree to a credit for a minor repair the inspector found.” An agent will walk you through what levers you may want to pull based on your own goals, budget, and timeframe. 5. Not Using a Real Estate Agent Notice anything? For each of these mistakes, partnering with an agent helps prevent them from happening in the first place. That makes trying to sell your house without an agent’s help the biggest mistake of all. Real estate agents have experience and expertise in pricing, marketing, negotiating, and more. That knowledge streamlines the selling process and usually results in drumming up more interest and ultimately can get you a higher final price. Bottom Line If you want to avoid making mistakes like these, you need to call us. 

How The Economy Impacts Mortgage Rates

As someone who’s thinking about buying or selling a home, you’re probably paying close attention to mortgage rates – and wondering what’s ahead. One thing that can affect mortgage rates is the Federal Funds Rate, which influences how much it costs banks to borrow money from each other. While the Federal Reserve (the Fed) doesn’t directly control mortgage rates, they do control the Federal Funds Rate. The relationship between the two is why people have been watching closely to see when the Fed might lower the Federal Funds Rate. Whenever they do, that’ll put downward pressure on mortgage rates. The Fed meets next week, and three of the most important metrics they’ll look at as they make their decision are: The Rate of Inflation How Many Jobs the Economy Is Adding The Unemployment Rate Here’s the latest data on all three. 1. The Rate of Inflation You’ve probably heard a lot about inflation over the past year or two – and you’ve likely felt it whenever you’ve gone to buy just about anything. That’s because high inflation means prices have been going up quickly. The Fed has stated its goal is to get the rate of inflation back down to 2%. Right now, it’s still higher than that, but moving in the right direction (see graph below): 2. How Many Jobs the Economy Is Adding The Fed is also watching how many new jobs are created each month. They want to see job growth slow down consistently before taking any action on the Federal Funds Rate. If fewer jobs are created, it means the economy is still strong but cooling a bit – which is their goal. That appears to be exactly what’s happening now. Inman says: “. . . the Bureau of Labor Statistics reported that employers added fewer jobs in April and May than previously thought and that hiring by private companies was sluggish in June.” So, while employers are still adding jobs, they’re not adding as many as before. That’s an indicator the economy is slowing down after being overheated for quite some time. This is an encouraging trend for the Fed to see. 3. The Unemployment Rate The unemployment rate is the percentage of people who want to work but can’t find jobs. So, a low rate means a lot of Americans are employed. That’s a good thing for many people. But it can also lead to higher inflation because more people working means more spending – which drives up prices. Right now, the unemployment rate is low, but it’s been rising slowly over the past few months (see graph below): It may seem harsh, but a consistently rising unemployment rate is something the Fed needs to see before deciding to cut the Federal Funds Rate. That’s because a higher unemployment rate would mean reduced spending, and that would help get inflation back under control. What Does This Mean Moving Forward? While mortgage rates are going to continue to be volatile in the days and months ahead, these are signs the economy is headed in the direction the Fed wants to see. But even with that, it’s unlikely they’ll cut the Federal Funds Rate when they meet next week. Jerome Powell, Chair of the Federal Reserve, recently said: “We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.” Basically, we’re seeing the first signs now, but they need more data and more time to feel confident that this is a consistent trend. Assuming that direction continues, according to the CME FedWatch Tool, experts say there’s a projected 96.1% chance the Fed will lower the Federal Funds Rate at their September meeting. Remember, the Fed doesn’t directly set mortgage rates. It’s just that whenever they decide to cut the Federal Funds Rate, mortgage rates should respond. Of course, the timing of when the Fed takes action could change because of new economic reports, world events, and other factors. That’s why it’s usually not a good idea to try to time the market.

3 GRAPHS THAT PROVE THERE WON’T BE A HOUSING MARKET CRASH

There are a whole lot of people who think a housing crash is coming. And who can blame them? From YouTube videos to social posts and media headlines…there’s so much noise about what’s ahead for the housing market.  Whether you realize it or not, this is negatively impacting your business, because this misconception is affecting your clients’ thoughts about the market, and ultimately, their decisions. HOW HOUSING CRASH FEARS IMPACT BUYERS AND SELLERS   On the one hand, you have people sitting on the sidelines waiting (and hoping for) home prices to drop. They want a crash to happen because they’re holding out for that deal of a lifetime. In fact, a survey found that 32% of people think it’s the only way they’ll be able to buy a home.   Then you have current homeowners. Maybe they’re thinking about selling, but worry they’ll take a loss if prices drop drastically. They don’t want to buy their next home at the top of the market to then have their investment go belly up.   If you’ve gotten this objection from even just one client or prospect, you have a chance to clear the air and prove your value as a housing market expert.   Stay Educated with the Latest Data & Insights THE MAIN REASON THE HOUSING MARKET WON’T CRASH   Let’s go back to your high school economics class. You’ll remember one of the first lessons it covered: supply and demand. When supply is low and demand is high, prices go up. When it’s the reverse, they go down.  Looking at it from the lens of the housing market, we can apply the same rule. While inventory is on the rise, there are still too few homes for sale to meet demand.   “There’s just generally not enough supply. There are more people than housing inventory. It’s Econ 101,” said Mark Fleming, Chief Economist at First American.  Therefore, inventory, or rather a lack thereof, is the biggest reason we will not see a drastic drop in home prices.   But if that isn’t enough to convince your clients that a housing crash isn’t coming, showing them these three graphs should help too.  WHY TODAY’S MARKET IS SO DIFFERENT FROM 2008   Even though there are more homes for sale now compared to last year, the overall supply is still pretty low. Nationally, we have about a third of the inventory we had in 2008. With fewer homes on the market, prices are unlikely to drop significantly. A repeat of 2008 would require a lot more people selling their homes and not enough buyers, and that’s just not happening, especially since so many people are holding on to their homes right now due to their historically low mortgage rates.  There’s also been talk about all the new homes being built. While new houses make up a bigger slice of the market than usual, it’s nothing to worry about. Builders aren’t overbuilding right now – they are just catching up from years of underbuilding since the last crash. So, even with more new homes available, the supply still isn’t meeting the demand.  Foreclosures and short sales aren’t flooding the market either. Thanks to tighter lending standards, we have more qualified buyers and fewer foreclosures. Even though foreclosures are up a bit, as expected, they’re still below normal levels. This means we’re not seeing even close to the number of distressed properties that we did during the last crash.  And like the cherry on top of a sundae, we have this quote from Business Insider to drive this point home: “Though many Americans believe the housing market is at risk of crashing, the economists who study housing market conditions overwhelmingly do not expect a crash in 2024 or beyond.”  So, with inventory levels low compared to demand, prices aren’t going to drop drastically. Even top industry economists and experts agree: this isn’t a bubble about to burst. We’re in a much more stable place than in 2008, and a market crash is unlikely.   Everyone in your sphere needs to hear this. They need to see the data and hear what trusted  professionals are saying, not some person on YouTube. That’s how you help them connect the dots and bust any fears or doubts.  And it’s why these three graphs are so powerful – they show just how different today’s market is from the one that led to the crash.   Being proactively educated instead of reactive is and always will be the best road to take if you want to be a true real estate expert.  That’s how you build trust, prove your value, and grow your business.