Welcome to the latest news roundup in which we bring you three stories in one. Today, we're covering the shockingly high vacancy rate of homes in the U.S. Plus: why younger generations are in line for a fraction of the $93 trillion some are expecting from Boomers. And finally, we explore the near-complete exclusion of renters on minimum wage in many major metros.
10% of U.S. Homes Are Vacant Today
Last week, Realtor.com cited research that showed one in 10 U.S. homes (14.5 million houses) are uninhabited on any given day. Of those:
- 32.6% are vacation homes or pieds-à-terre
- 18.2% are rental units awaiting tenancy applicants
- 5.5% are for sale, awaiting buyer occupation
- 4.1% have been rented but are as yet unoccupied by the tenant
- 0.2% are being held for migrant workers
"However, the most common reason (35.9%) a home was listed as vacant is 'other,' a category that includes homes that await settlement of an estate, legal proceedings, repairs, or unspecified personal reasons," says Realtor.com.
As is usual with real estate data, there are large variations in vacancy rates between states. Some of the highest rates are:
- Maine — 20.6%
- Vermont — 19.4%
- Alaska — 17.6%
Unsurprisingly, these are the three states in which the proportion of seasonal or vacation homes is highest.
Meanwhile, the lowest vacancy rates are on the West Coast: Washington (7.3%), and Oregon and California (both 7.5%)
Several states are moving to discourage second homes in an effort to relieve the housing crisis. These include California, Hawaii, Montana, New York, Rhode Island, South Carolina, Vermont, and the District of Columbia.
If You're Waiting to Inherit Boomers' $93 Trillion, Don't Hold Your Breath
"After accounting for liabilities, removing the top 1 percent of households and subtracting retirement spending, taxes and fees, approximately $36 trillion of boomers’ $93 trillion in assets will transfer to heirs over the next 20 years," says a Visa Business and Economic Insights report, published last week.
Now, $36 trillion is not to be sniffed at. But it's very different from $93 trillion — and even further apart from the widely quoted $124 trillion forecast by Cerulli Associates at the end of 2024.
It's true that the Visa figure excludes those in the financial top 1%, while Cerulli's doesn't. But if the top 1% has $88 trillion in assets, leaving $36 trillion for the other 99%, the distribution of wealth is even more skewed than we thought.
But why the gap between the $93 trillion in assets Boomers currently hold, and the $36 trillion their heirs look set to inherit? There look to be three main reasons:
- Retirement is costly — Living expenses erode a big chunk of retirees' assets as they age.
- More retirees have debt, including mortgages, than previously. And borrowing costs are high.
- Taxes and fees nibble away at yet more assets.
So, by the time they die, many Boomers have less than half the assets they started out with.
One of the Visa report's inferences particularly surprised us: "Nearly 75 percent of those receiving an inheritance already have a higher net worth than the median household. As a result, $28 trillion of the $36 trillion is likely to be saved or invested." In other words, three-quarters of the money inherited from boomers will go to people who are already well off and have no pressing need for the cash.
People on Minimum Wage Can't Afford to Rent an Apartment in Any Major Metro
"A single minimum-wage worker couldn’t afford a one-bedroom apartment in any of the country’s 50 largest metros using the 30% rule," according to a new study published by Clever Real Estate on Jul. 13.
The 30% rule is explained by the American Apartment Owners Association. "The most common benchmark is the 30% rule: monthly rent should be no more than 30% of gross monthly income," says the association. "Many landlords also use the 3x rent rule during tenant screening, which means the applicant must earn at least three times the monthly rent in gross income."
Some argue that the 30% rule is out of date, although Chris Herbert, managing director of Harvard's Joint Center for Housing Studies, told PBS late last year that it was still "not bad." That's true.
However, for many low-income people in big cities, it's impossible. Many are forced to pay 50% or even more of their pre-tax income on the most basic apartment.
And that can set up serious affordability challenges for food and transportation. No wonder many work two or more jobs.
In the least affordable cities for minimum-wage workers, those challenges become extreme.
"Although minimum wages vary across the country, 17 of the 50 most-populous metros still pay the federal minimum of $7.25 an hour," said the report's authors in a news release. "Federal minimum-wage workers would have to work an impossible 174 hours a week to afford the median one-bedroom rent in the 50 largest metro areas." There are 168 hours in a week.
