The achievement of homeownership for many has been a cornerstone of their financial stability. Many baby boomers have found themselves property "rich" as property values have continued to skyrocket in the last five years. Although very thankful for their own good fortune, many baby boomers are now seriously concerned about the prospects that their children will ever be able to afford to purchase a home. With the median sales price of a California home exceeding $550,000, less than 14% of all California households are able to qualify. The ability to qualify is based on the buyer coming in with a 20% down-payment, and using a 30 year fixed rate loan with current interest rates at or slightly above 6%. If the incomes of the offspring of the baby-boomer generation are analyzed separately, they are even less likely to be able to qualify.
The California Association of Realtors and the National Association of Realtors has identified Housing Affordability as one of the critical issues facing the industry. Many cities have, in response to calls for action, started working on policies to help make housing more affordable. The Homeownership Alliance, an alliance of varied industry trade association and non-profit associations, has published a survey of different programs across the country that have been acknowledged as providing workable solutions to this problem. Ultimately, the health of the real estate industry depends on the ability of buyers to buy, providing those who wish to sell the buyer pool and means to do so. If you are interested in reading the full report it can be found at the Homeownship Alliance website.
Baby boomers who want their children to enjoy the benefits of homeownership can assist their offspring by teaching them what is involved in owning a property. The sooner a parent is able to get their child started on such an investment, the more likely the adult child will be successful. There is hardly any better time than the present, if the capacity is there. Today's real estate environment has generated tremendous amounts of equity, and there is no one more capable than the baby boomer generation to assist "our" children in ensuring that they will be able to afford a home. Our children will generally observe what we do successfully and will use that as an example of how to live their lives. If we are spendthrifts, it's very possible junior will be too. If we are frugal and prudent in our spending and asset acquisition, it's highly likely that your children will be as well.
This mentoring generally occurs subconsciously and is even more powerful if conscious attention is paid to the fact that your children are watching you. As a method of instruction, a parent could assist their adult child to purchase a property jointly with them, and assist them in the management of the property. In time, as they learn to handle the finances and management of the investment, a parental decision can be made to partition the gains. Eventually, the parent can help their children gain financial independence by making that decision to partition the gains, or by "gifting" them their (the parent's) interest as a reward for the adult child's successful completion of the "mentoring" program. It would be wise to check with your accountant to see how this would directly affect your particular tax situation.
It's usually better to get involved in transitioning your adult child in this way-- being available to offer sound financial guidance and advice along the journey rather than to provide a lump sum of money that can be frittered away on frivolous or non-appreciating assets.
Nef Cortez has been dealing in real estate and foreclosures for over 29 years. For real estate trends and free foreclosure lists please visit Diamond Bar Real Estate
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