A recent article suggests that "Millennials are at the bottom of the real estate totem pole, but that could change soon as boomers are expected to pass down trillions of dollars over the next decade".
Millennials own a small fraction of America’s real estate wealth, but that could change in the coming decade as they inherit trillions of dollars in property from their boomer parents.
This so-called “great wealth transfer” is expected to transfer more than $53 trillion in boomer assets to younger generations, according to Cerulli Associates, a Boston-based research firm.
Cerulli Associates estimates that a huge chunk of that transfer will be real estate and millennials will likely be the biggest beneficiaries.
. . .
The wealth gap between boomers and millennials isn’t limited to real estate. According to Fed data, boomers have accumulated a staggering $77.55 trillion in wealth as of the third quarter of 2023.
Perhaps surprisingly, real estate isn’t even their largest holding; it's stocks and mutual funds, constituting $20.18 trillion of boomers' wealth. Baby boomers also amassed $8.72 trillion in pension benefits and $8.05 trillion in business assets.
In comparison, the millennial generation has just over $20 trillion in assets, of which only $0.4 trillion is held in stocks. That could soon change as millennials inherit $53 trillion worth of boomers' nest eggs over the next decade.
There's more at the link.
The numbers sound great, provided that there are buyers for the property, stocks, etc. that will be passed down. What if there aren't? It's all very well for our parents to own a house valued at half a million dollars; but after they die, if the housing market is in the doldrums when we try to sell it, we may be able to realize only half of that valuation, or even less. That's happened in the past, particularly when other parts of the economy melted down. For example, consider the stock market crash of 1929 that precipitated the Great Depression. A study titled "Real Estate Prices During the Roaring Twenties and the Great Depression" says of the Manhattan property market:
During the 1920s prices reached their highest level in the third quarter of 1929 before falling by 67% at the end of 1932 and hovering around that value for most of the Great Depression. The value of high-end properties strongly co-moved with the stock market between 1929 and 1932. A typical property bought in 1920 would have retained only 56% of its initial value in nominal terms two decades later.
Again, more at the link. Similar trends were observed in other housing markets at the time.
Too many people fail to remember (or perhaps were never taught) that we can't determine the market value of an object in terms of its intrinsic value (follow the links for definitions and explanations). Basically, an object's market value is what someone else is willing to pay for it. For example, if my wife has a diamond ring that cost us $10,000, and we need cash in a hurry for other needs (e.g. medical expenses), we might decide to sell it. We might begin by setting the price at what we paid for it - but what if nobody wants to buy a diamond ring right now? What if they need their money for other things? Someone might offer us a mere $2,000 on a "take it or leave it" basis. We have a choice. We can hold out for more money - but then we wouldn't have the cash we need right now, or even a part of it. If we take the cash, we lose 80% of the value of the ring at the price we paid for it - but we have money available for our other needs. The buyer sets the value, not the seller.
The boot's on the other foot, of course, when it comes to selling something that the buyer simply has to have. For example, in an emergency, food may not be readily available from a supermarket or neighborhood store. Someone who has reserve supplies of food may be willing to sell some of his surplus; but he probably won't do so at the price he paid for it, because its market value has gone up - perhaps way up - thanks to its current scarcity value. I've seen this in operation during civil upheavals in several African nations. A sack of cornmeal (maize meal in African terms) that would normally sell for about $5 was selling for between $50 and $75, and there were very few buyers because nobody had enough cash to pay that much. Those with other valuable goods - e.g. a jerrycan filled with gasoline, or meat from a hunted animal - could barter for the cornmeal, and usually did, because cash and/or physical assets like jewelry or precious metals were worth less than food.
That's why I caution against putting a great deal of one's savings into physical objects like gold and silver. Sure, invest some money in them: they have intrinsic value and are a time-honored store of value, and are very likely to retain that value if (when?) fiat currency becomes devalued or even worthless. However, don't go overboard on them, because in an emergency their intrinsic value may not be realizable in the short term. You can't pay university fees for your child, or buy groceries, or purchase an airline ticket, with gold or silver coins. You need cash for that. It's not a good idea to be asset-rich but cash-poor. A balance is necessary. (See the definition of "house poor" for an example. If one inherits a valuable property, but has to spend a lot on rates, taxes, upkeep and services, that may be the result.)
If wealth is to be inherited, the value of that inheritance will be determined by the market at the time that it's transferred and/or sold. Example: my wife and I paid a very reasonable price (for the time) when we bought our home in 2016. It's valuation has more than doubled since then; but that doesn't say it's actually worth more than double what we paid. If one of us dies and the other wants to sell the house, it'll be worth what buyers are willing to pay for it at that time. That may be double what we paid . . . or it may be half. We can't predict that, and we won't know until we try to sell it. If there are no buyers, and no bank will give us a loan secured by the house, it'll be effectively worthless to us in cash terms (although it'll still provide shelter, of course). The same would apply if, in our will, we left our home to someone else. He or she would inherit a basically valueless asset in cash terms.
If anyone's expecting to inherit a financial windfall, they should think long and hard about that reality. The market alone will determine its actual value.