The Transfer of Wealth
Parents who would like to see their adult children leave the nest are increasingly buying their offspring their own places. Once upon a time, Mom and Dad would wait until their kids were starting their own families to help them buy a house or apartment, if they offered any help at all. But now, that kind of assistance is coming earlier and earlier — and continuing longer and longer. Leonard Steinberg, president of the New York real estate chain Compass, sees this trend as the vanguard of an enormous shifting of assets that will happen over the next 20 years, as wealth accumulated by baby boomers is transferred to their heirs.
How much wealth? A staggering $30 trillion, Steinberg says, adding that it will be “the greatest transfer of generational wealth ever.” And this isn’t an isolated occurrence — it’s a real trend, says Steinberg. While the trend is nationwide, Steinberg says it is more concentrated among larger cities where the cost of renting is sky-high. The reasoning: Why waste enormous amounts of money on rent — a “reckless” expenditure, in Steinberg’s words — if a parent can help a child get started in homeownership instead? Hopefully, doing so will give the children a leg up on all the financial benefits from building equity, and foster values necessary to homeownership, like commitment.
It also helps grown kids who have gotten themselves into the financial netherworld of bad credit — perhaps due to the burden of scholastic debt — or who have no debt, or credit history, at all. In those cases, their debt-to-income ratio is either so high or so nonexistent that it’s all but impossible for them to qualify for financing on their own. It may sound as though this kind of maneuver is the exclusive province of millionaires, but Steinberg says he sees it over all niches of wealth. “A $50,000 cash infusion can make all the difference,” he says.
Source: Lew Sichelman, Uexpress
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