Home prices are flat to decreasing in most areas of the country, and rates are starting to fall, improving affordability for potential home buyers who have been waiting on the sidelines.
However, potential buyers face skyrocketing homeownership costs, including rising property taxes and insurance costs, not to mention higher property maintenance costs. These higher ownership costs are a hinderance for some first-time homebuyers.
What’s more, there continues to be a serious lack of supply in many markets – particularly the Northeast. Not only does new home construction need to increase to meet demand, the supply of existing homes needs to increase further before it becomes a buyers market.
One factor that might help boost the supply of existing homes in the years to come is the Great Baby Boomer Wealth Transfer, which is expected to have a significant impact on the housing market overt the next 20 to 30 years. Boomer homeowners downsizing and moving into assisted living could be the ticket to boosting inventory and fueling home sales.
In a wide-ranging interview with MortgageOrb, Emmanuel St. Germain, CEO for Florida-based Choice Mortgage, discusses this and other factors that will reshape the housing market moving forward.
Q: What do you think will happen to real estate when the wealth transfer from Baby Boomers starts?
St. Germain: This is a great question, and one with many factors to consider. To start, let’s look at the scale: An estimated $70 trillion in wealth is expected to transfer over the next 20–30 years, with a significant portion tied to real estate.
One likely effect is an increase in housing supply as Baby Boomers pass away or downsize—particularly in suburban and retirement-heavy markets like Florida and Arizona. Downsizing could also create stronger demand, and therefore a premium, for condos and townhomes, which require less maintenance. On the other hand, we may see downward pressure on prices for the single-family homes Boomers leave behind.
This wealth transfer will also inject substantial liquid assets into younger generations, giving them more buying power through larger down payments or even cash purchases. That influx of capital could drive spikes in demand for certain markets.
At the same time, the rise of remote work has reshaped geographic preferences, fueling growth in already popular areas while reducing demand in less desirable ones.
I think the bottom line is the Boomer wealth transfer is poised to expand housing supply, increase purchasing power for younger buyers, and reshape demand patterns across property types and locations.
Q: What is your perspective on what is happening with interest rates?
St. Germain: Interest rates have been trending downward in the last few weeks which is a great sign for consumers and the real estate industry. That being said, they are going down not because inflation has dropped but rather because of the weakening labor market. At the same time, new construction inventory is at national levels that have matched five prior years, all of which precedes a recession. A recession is obviously not a good economic sign but it would drop interest rates which would translate to an increase in purchase and refinance activity.
Q: How can the industry address or fix housing affordability?
St. Germain: Incomes have not risen at the same level as the cost of real estate so affordability has taken a big hit. It will be very difficult to fix this in most markets since a rate drop will increase demand which could lead to even higher prices. The rate lock in effect which is where homeowners are “stuck” in their existing home because the thought of buying a new home at 7% when they currently have a 3% is daunting. If rates drop into the 5s, that gap is predicted to unlock many of those potential sellers and buyers. On a national level, affordability will extend beyond the metropolitan markets and help grow those surrounding areas, but I don’t believe affordability will get better in high demand areas.
Q: How would the elimination of property taxes (which Florida is considering) affect the industry?
St. Germain: This is a complex issue, and before even considering the idea of eliminating property taxes, it’s important to understand where that revenue goes. Property taxes are not paid to the state—which is why Gov. Ron DeSantis (R) can promote the idea without state-level revenue consequences—but to the counties, which then allocate funds to each municipality.
The challenge is that municipal budgets, along with the contractors they fund, are not incentivized to save money. In fact, they are often penalized. For example, if a landscaping contractor spends less than the allocated amount, their budget is reduced the following year rather than rewarded for efficiency. This creates a misalignment between municipalities and contractors.
Even with property values doubling and Florida’s population growth expanding the revenue base, the significant budget cuts required to offset lost property tax revenue make such a proposal highly unlikely to pass. If, hypothetically, a deal were reached, the impact on the housing market would be dramatic: property values would rise as demand surged, since consumers could afford “more” home, pushing prices even higher.
It’s an interesting debate topic—but one that, realistically, is unlikely to become a reality, unfortunately.
Q: Since you are based in Florida, with the proliferation of natural disasters, where do you see the future of homeowners insurance?
St. Germain: Carriers have started coming back into Florida creating more options for consumers and there is an optimism in the air for homeowners here. We can’t predict what the next big natural disaster will be or when it will affect us here but the longer we are able to avoid a major storm the better for insurance premiums. Overall, insurance—although having some good news recently—is still a concern for the future of Florida residents and the real estate industry.