Home Prices

A new study says that when it comes to things like end-of-life trusts and financial plans, most millennials aren’t as concerned as maybe they should be.

In spite of the possibility that nearly half are in line as part of the “Great Wealth Transfer,” many are more concerned about how to balance caring for both children on one side and their aging parents on the other, not to mention a ragged housing market. All of that leads to one thing: building their wealth for future generations is a challenge.

The study from Trust & Will, a digital estate planning and settlement platform, asked 15,000 millennials about their end-of-life and estate planning preferences. An unexpectedly high number of millennials – 62% – don’t have a will or trust; and more than half – 56% – couldn’t answer the question of what would happen to their assets if they died without an estate plan.

The darn-if-you-do, darn-if-you-don’t position is unfortunate because millennials want to pass on their wealth. Out of the overwhelming number of Trust & Will’s millennial members who had children (73%), 74% say it is important to them to leave their children some sort of financial cushion.

What is it that millennials need help with? Communication!

Despite these pressures, millennials are their own generation and, as such, prioritize things differently than their baby boomer parents. For one thing, they put estate planning over everything else – protect their assets, provide for loved ones (including pets), and express their own wishes for end-of-life arrangements. Millennials are also leaving a mark through charitable contributions, with many including donations in both their budgets and estate plans. 

What millennials need to do, though, is get out of their way about not wanting to communicate their end-of-life plans with their families or parents, suggests Mitch Mitchell, associate counsel at Trust & Will. “Millennials still need to learn what their parents' estate plans are and if they even exist,” he told ConsumerAffairs.

Mitchell contends that being part of the “Sandwich Generation” – the phase of life where they’re taking care of both growing children and aging parents – is more than your typical millennial bargained for. Their “double duty” in taking care of their own expenses and duties as well as making sure their parents are in good shape, is a lot.

“Most importantly, have a conversation with your family about what your plans are. Be honest and set realistic expectations with your family. You might not have a lot, or anything to pass along - just be sure that you're communicating that effectively,” Mitchell said, speaking to millennials.

“Set aside funds for your own health and end-of-life needs, if you can. This will greatly reduce the burden on your remaining family members after your passing. The average funeral costs $8,300 in the U.S., so you might also consider more affordable and eco-friendly green burials or cremation as alternative options.”

Where should millennials start?

While this sandwich generation might not be what most millennials bargained for, both sides of the coin need to be addressed. Ashley Eneriz, finance editor at ConsumerAffairs said that the first step is to start with your parents. 

“You need to know both what you will be inheriting as well as what long-term care plans are for aging parents. If parents do not have their estate planned out in a way that covers exaggerated and expensive health conditions, it will eat away at the inheritance and add more financial strain on millennials,” Eneriz advises. “Additionally, millennials need to be aware of any tax bills or surprise bills they will inherit – i.e. if your parents have a reverse mortgage, that balloon payment will be due upon their death.”

On the other side of the coin, Eneriz thinks millennials need to ensure that they are leaving financial protection behind for their children, even if they feel like they don’t have anything to pass down. 

The easiest place to start could be a term life insurance policy, simply because applying for a 15- or 30-year term insurance plan is going to be more affordable for someone in their late 30s than waiting until their late 40s to apply. 

“In the event of your death, you want there to be enough funds to cover your spouse and children financially. This means that your insurance payout should be able to cover funeral costs, several years of mortgage or rent payments, debt repayment and even future expenses like your child’s college fees,” Eneriz said.

Estate planning is not as hard or expensive as it sounds 

Once you have the first two steps handled, it is time to sit down with an estate planner or trust attorney. Whether it’s Trust&Will or another online estate planning service, what seems like a daunting task can fit into your otherwise busy life these days.

“Additionally, check with your employer’s benefits to see if you can opt for legal coverage, which will also cover the costs associated with using a trust attorney,” Eneriz commented. “Estate planning is essential even if you don’t have a mansion to pass down. You will need to name guardians for your children and any other individuals you will need to care for full-time, as well as direct how certain funds, such as your life insurance policy or retirement funds can be used.”

In October, mortgage rates were around 8%, but that didn’t deter home sellers. Data compiled by CoreLogic shows home prices that month were 4.7% higher than in October 2022.

But all real estate is local. Price changes varied from market to market across the country.

To provide a visual element to these price changes, the Federal Reserve Bank of New York put the data into a map of the U.S. Homes in counties shaded in blue gained value while those in brown lost value. Counties in white were not measured.

The map shows that red-hot Miami-Dade County cooled down a bit in October, with home prices rising 8.8%, down from recent double-digit gains. Maricopa County, Arizona – another active market during the pandemic, saw home prices rise but only by 2.2%.

Markets with double-digit gains were few are far between. Home prices in Chippewa Falls, Wisc., surged 22.2%. The price of a home in Becker County, Minn., rose 15.5% and 16.1% in Siskiyou County, Calif., the northernmost country in the state.

Price declines were more numerous in the West and Southwest. Home prices in Travis County, home of Austin, were down over 6%. Home prices in Okanogan County, Wash., were 5.3% lower than a year ago.

While the October 2023 map doesn’t show the housing market “crash” that many people predicted, the October 2022 map shows just how much prices have changed in 12 months.

In October 2022, home prices in Miami-Dade County increased 22.2% over the previous year and prices in Albany County, Wyo., a popular ski area, had gained 20.2%.

After rising to nearly 8% in October, mortgage rates are falling. Over the last two weeks, the 30-year fixed-rate mortgage rate has fallen to 7.03%. Since the October high, rates have fallen 69 basis points, the fastest rate since the 2008 housing market crash.

“The 30-year fixed-rate mortgage averaged near 7% last week, down from nearly 7.80 percent just six weeks ago,” said Sam Khater, Freddie Mac’s chief economist. “When rates began to rapidly drop, purchase applications rebounded initially, but this improvement in demand diminished in the last week. Although these lower rates remain a welcome relief, it is clear they will have to further drop to more consistently reinvigorate demand.”

If so, how far do rates have to drop before affordability improves and buyers return to the market? Desiree Avila, a board-certified Realtor with CRR Fort Lauderdale, says buyers appear to be recovering from the shock of high interest rates and may be ready to buy if rates keep falling.

“I think in the range of the low 7’s, high 6’s can spur spending,”Avila told ConsumerAffairs. “Current rates have not deterred buyers completely, many are finding a way to make it work.”

For example, some buyers have resigned themselves to taking out a high-interest mortgage with a plan to refinance the loan when rates fall. Some buyers are buying down points for a time to reduce the up-front rate. 

There’s still pent-up demand

Avila says there continues to be pent-up demand. If rates continue to fall it could “unleash” a flurry home home-buying. 

“Over the next six months, I am hopeful we will dip into the 6’s,” Avila said. “This would mean reversing a year of interest rate hikes, so I don’t think it will be in the low 6’s, but the high 6’s.

A drop in home prices might also help buyers get back into the market but so far this year, there is little evidence of that. In spite of 8% mortgage rates, the National Association of Realtors (NAR) reports the median home price in October was $391,800, a 3.4% increase over October 2022.

Total housing inventory at the end of October was 1.15 million units, up 1.8% from September but down 5.7% from one year ago. 

Home sales appear to have hit a brick wall. The combination of near-record home prices and rising mortgage rates has drastically reduced home affordability.

But since early in 2023, home prices just about everywhere have continued to go up. Now, a new report from real estate brokerage company Redfin suggests home prices are beginning to come back to earth in more markets.

The report found that nearly 7% of homes for sale posted a price drop during the four weeks ending October 29, on average, the highest portion on record. In the background, mortgage rates hit their highest level in 23 years last week, cutting even more into what buyers can afford.

Rates have retreated a bit this week but are still elevated, considering the median home price is now over $350,000. But it may take some time for meaningful price reductions to appear in most markets.

'Bizarre' housing market

In spite of slowing sales, low inventory is propping up prices. The total number of homes for sale is down 10% year over year; new listings are up 1% from a year ago – just the second increase since July 2022 – but that’s partly due to new listings falling quickly at this time last year. 

Redfin analysts – as well as many real estate agents – describe the housing market as “bizarre.” Sellers are dropping prices while the average home price continues to rise. Redfin agents describe a mismatch between sellers’ high expectations and the reality of buyers’ budgets, saying it’s more important than ever for sellers to price fairly from the start to attract buyers and sell quickly. 

“Some sellers are pricing too high because they have FOMO (fear of missing out) after their neighbor’s house sold well over asking price two years ago,” said Seattle Redfin Premier agent Patrick Beringer. “While low inventory is driving some competition and relatively affordable homes in popular neighborhoods are still selling fast, they’re getting two or three offers as opposed to 20 offers at the height of the market. With mortgage rates in the 7.5% to 8% range, buyers simply don’t have the budget they would have had two years ago or even one year ago.”

Court verdict could be another hurdle

But if last month's federal court verdict against the National Association of Realtor (NAR) stands, home buyers could face another hurdle. A jury in Kansas City, Mo., found NAR and two major brokers liable for keeping sales commissions high and awarded damages of $1.8 billion.

In a normal transaction, the buyer’s agent and the seller’s agent split a 6% sales commission. The plaintiffs in the case said they shouldn’t have to pay the buyer’s agent and therefore the commission should be a lot less.

If the case stands, homebuyers will have to pay the real estate agent who represents them, adding to the cost of buying a home. But NAR President Tracy Kasper says the case is “not close to being final.”

“We will appeal the liability finding because we stand by the fact that NAR rules serve the best interests of consumers, support market-driven pricing and advance business competition,” Kasper said. “We remain optimistic we will ultimately prevail.”