Historically, wealth passed down through families tended to be smaller, often consisting of modest inheritances or savings. However, the current trend is far more significant.
According to a recent Bankrate article:
“The biggest wave of wealth in history is about to pass from Baby Boomers over the next 20 years, and it’s going to have major impacts on many facets of life. Called The Great Wealth Transfer, $84 trillion is poised to move from older Americans to Gen X and millennials. If it’s managed smartly, Americans will be able to grow their wealth and ensure their financial security.”
As these assets change hands, the younger generations have the opportunity to build and grow their wealth. In San Diego, a city known for its vibrant housing market and booming economy, this wealth transfer is likely to fuel new opportunities for both buyers and sellers. This transition will create ripple effects throughout the community, influencing financial futures for decades. The graph below, using data from Merrill and Cerulli Associates, highlights the significant wealth projected to be inherited by 2045.
Understanding and preparing for this significant financial shift is crucial, especially in a competitive market like San Diego’s.
Impact on San Diego’s Housing Market
Home affordability has long been a challenge for many potential buyers, particularly in San Diego’s most sought-after neighborhoods. With the upcoming increase in generational wealth, we could see these barriers begin to lessen. As assets transfer from older to younger generations, future homeowners are likely to gain greater financial resources, simplifying the process of buying a home in San Diego’s competitive market.
As assets transfer to younger generations, many buyers may become better positioned to afford homes, potentially driving a rise in homeownership and creating opportunities to upgrade or invest in additional properties.
According to a recent article by Merrill:
“While millennials face steep barriers . . . to buying a first home in many markets, ‘that’s a for-now story, not a forever story’ . . . The Great Wealth Transfer should enable more of them to become homeowners — or trade up or add a second home — either through inherited property or the funds for a down payment.”
San Diego, with its desirable location and strong demand, is likely to be at the forefront of this shift, making it an exciting time for both buyers and the real estate market as a whole.
Impact on San Diego’s Economy
The Great Wealth Transfer doesn’t just affect the housing market; it has a far-reaching impact on San Diego’s local economy as well. As significant amounts of wealth shift between generations, this influx of capital opens up new opportunities for aspiring entrepreneurs in the city. For those looking to start a business, these inherited funds can serve as the vital capital needed to launch their ventures. This, in turn, fuels economic growth by allowing the next generation of San Diego innovators and business owners to bring their ideas to life and contribute to the city’s vibrant business landscape. With San Diego’s entrepreneurial spirit already thriving, the wealth transfer could further accelerate the pace of innovation and create a more dynamic local economy.
The Bottom Line on The Great Wealth Transfer
In today’s housing market, affordability continues to be a hurdle for many, especially in vibrant cities like San Diego. The ongoing Great Wealth Transfer is expected to create new opportunities. As wealth transfers and investments occur, it may break down barriers that have previously prevented people from achieving homeownership. In San Diego, where the real estate market is both competitive and desirable, this shift could lead to more opportunities for first-time buyers and fuel growth in various entrepreneurial ventures across the city.