Greatest Transfer of Wealth in Modern History

As the weather warms and pandemic restrictions ease across much of the country, the U.S. housing market shows little sign of cooling. Robust buyer demand, fueled by low mortgage rates, continues to outpace supply, which remains near historic lows. Nationwide, inventory remains much lower than it was at this time last year, and sales prices are surging as a result.

With such a limited supply of existing homes to purchase, all eyes are on home builders to provide a much-needed boost of inventory to the market to help meet buyer demand. However, increasing material and labor costs, along with supply chain challenges, have contributed to significantly higher construction costs, with builders passing these costs on to homebuyers. New home construction continues to be a challenge locally in San Diego especially with building type. Many of the local economists that I hear speak have addressed concerns that most new construction planned in San Diego is multifamily (condos, apartments, townhomes, etc.) with only about 10% projected as single family detached homes.

As tight supply remains an issue and home prices continue to surge, many would-be buyers continue to face affordability challenges that are difficult to overcome. To overcome these challenges, many buyers are receiving gifts or assistance from family members to afford these homes or to be competitive enough to purchase the home. Many have described the last 15 months as the greatest wealth transfer in modern history. It is expected that older generations will hand down some $70 trillion between 2018-2042, according to research and consulting firm Cerulli Associates.

With the reopening of the state on June 15th, the economic outlook will no doubt improve in the second half of the year. We can also expect the return of the foreign traveler / investor this summer as the dollar has fallen against other currencies (like the Euro and Pound Sterling). The foreign investor is a sector of the real estate market that has been absent the last 15+ months. I continue to take many calls from Sellers and Buyers in this marketplace and always welcome the opportunity to reconnect with you or speak with your referrals.