Meet the typical 40-year-old millennial, who has $128,000 in debt, is not nearly as wealthy as their parents were, and is known as ‘geriatric’

millennial
The oldest millennials turn 40 this year.

The oldest millennials enter middle age this year.

The generation turns ages 25 to 40 in 2021, per the Pew Research Center’s definition. Like everyone, millennials are aging. But it’s a hard concept to grasp when the media narrative has painted millennials as young, frivolous 20-somethings who love selfies and can’t afford anything because they spend too much money on avocado toast.

It’s an inaccurate picture of the entire generation, which has been shaped by technological advancements and a broken economy. But the typical 40-year-old millennial especially doesn’t quite align with this image. Many feel they embody some characteristics of both Gen X and millennials, having experience with both analog and digital worlds.

Millennials are known for battling a series of economic challenges, from student debt to the Great Recession. The typical 40-year-old millennial bore the brunt of the financial crisis, leaving them with less wealth and more debt than past generations at their age. But, compared to their younger generational peers, they have less student debt and are more likely to own homes and have kids – a sign that many have been able to recover from the financial fallout.

Here’s what life looks like for the typical 40-year-old millennial.

The typical 40-year-old millennial was one of those hardest hit by the Great Recession.

40 year old millennial

When the 2007 financial crisis began, the 40-year-old millennial was 26, an age at which most of the generation hadn’t yet accumulated substantial wealth. It’s this cohort that bore the true brunt of the financial crisis,which left lingering effects a dozen years later when the coronavirus recession rolled around.

From the very beginning of their careers, they entered a dismal labor market that set them up for a long recovery.

“Millennials have lifelong damage, given the severity of the Great Recession,” Mark Muro, a senior fellow and policy director at the Brookings Institution, previously told Insider, adding that “older millennials were squarely hammered.”

 

Their early post-graduate years were marked by a tough job market that led to wage stagnation. The typical 40-year-old millennial earns $73,000 a year.

office worker

Boomers earned around $72,000 at that age, while Gen X earned around $68,000, according to a Bloomberg analysis of Federal Reserve data. That is all to say: wages have remained stagnant since 1989.

Wages haven’t kept up with soaring living costs for everything from healthcare to housing, creating a financial imbalance that’s been difficult for the 40-year-old millennial to rectify.

 

It’s made building wealth difficult. With a net worth of $91,000, the typical 40-year-old millennial is only 80% as wealthy as their parents were at their age.

Stressed woman

At age 40, Gen X was worth $94,000. Boomers held $112,000 in wealth at that age, per Bloomberg.

But the oldest millennials are catching up. A 2018 St. Louis Fed study originally found that those born in the 1980s have median levels 34% below older generations, causing the Fed to deem them at risk of becoming a “lost generation” for wealth accumulation.

“Not only is their wealth shortfall in 2016 very large in percentage terms, but the typical 1980s family actually lost ground in relative terms between 2010 and 2016, a period of rapidly rising asset values that buoyed the wealth of all older cohorts,” the 2018 report read.

A follow-up study in 2021 found 1980s millennials gained some ground, narrowing their wealth deficit to 11%. “It turns out that millennials may not be as ‘lost’ as we once thought,” according to the report. 

 

 

They also have $128,000 in debt. While some of this may be from student loans, they don’t carry the weight of student debt as much as younger millennials

Student loan debt

This debt is way more than what Gen X and boomers had at age 40 — $94,000 and $112,000, respectively, per Bloomberg.

One might first look to student loans as the source of this debt. College tuition has more than doubled since the 1980s, and student-loan debt reached a national high of $1.5 trillion in 2019. Many millennials are shouldering their share of this burden.

The typical 40-year-old millennial entered college in 1999, and graduated in 2003 (under a typical four-year plan). According to an analysis by the research team at Education Data, 73% of students graduating that year took out a student loan. That year, the average debt at graduation per student was $16,070, equivalent to $22,170 today.

But that’s not as much as the typical youngest millennial, who turns 25 this year. They graduated with about $29,500 in student debt.

 

It’s likely a good chunk of that debt comes from a mortgage. The typical 40-year-old millennial owns a home.

house

According to an Insider analysis of 2019 American Community Survey microdata from the University of Minnesota’s IPUMS program, 61.9% of 40-year-old millennials (who were 38 when the survey was taken) own a home.

However, that’s still lower than previous generations at that age: 68% of Gen X and 66% for boomers. As housing prices climbed over the years, millennials began renting longer and buying later. While some have finally been able to afford a house amid low interest rates during pandemic, the demand has exacerbated a historic housing shortage that has pushed homeonwership further out of reach for other millennials.

The homeowning life stage means that most 40-year-old millennials have a mortgage. It aligns with previous findings from an Insider and Morning Consult survey, which found that’s it not just student-loan debt millennials are swimming in. A mortgage is typically their biggest debt, according to the survey. 

 

They also have kids. Achieving these standard life milestones is a sign that many have caught up from the delayed effects of the Great Recession.

mother baby

“The oldest millennials delayed many of the traditional markers of adulthood, such as marriage, kids, and buying homes, as they went through the eye of the Great Recession and the long and uneven recovery afterward,” Jason Dorsey, a consultant and president of the Center for Generational Kinetics, previously told Insider

As millennials delay marriage and homeownership, they’ve delayed childbearing until they they felt more financially sound. More women are having kids at a later age than ever.

But as of 2019, 66% of 40-year-old millennials (who were 38 at the time), have kids, according Insider’s analysis of 2019 American Community Survey microdata from the University of Minnesota’s IPUMS program.

But the typical 40-year-old millennial dissociates from their generation. Caught between Gen X and millennials, they almost feel generationless.

older millennial

As Alisha Tillery wrote for Shondaland, being the oldest millennial “is to be an outlier of sorts, to really have no generation to identify with at all, yet be perfectly okay with not fitting into one box or the other.”

“We are caught in a tight space that remembers the days of old (before Google, Facebook, and YouTube), but is also intrigued by the future and a new way of doing things,” she added.

Jessica Guinn Johnson, an attorney in Baton Rouge, Louisiana, born in 1981, told Tillery, “I never found that I fit in the millennial mold, but identified more with Gen X.”

Robert L. Reece, a University of Texas-Austin sociology professor, told Tillery there’s validity in classifying oneself as a millennial but not identifying with the typical characteristics of the generation.

It explains why the 40-year-old millennial is largely seen as being part of a microgeneration, for which there have been many names.

geriatric millennial

As Tillery wrote, some millennials feel they better identify with the cusper (someone who straddles two generations) term Xennial. It describes a micro-generation “that serves as a bridge between the disaffection of Gen X and the blithe optimism of millennials,” Sarah Stankorb wrote for Good Magazine in 2014.

In a Medium article that went viral in the spring, author and leadership expert Erica Dhawan called the micro-generation that the 40-year-old millennial falls into “geriatric millennials,” which she defines as those born between 1980 and 1985. What sets them apart, she recently told Insider, is their experience with technology.

 

The typical 40-year-old millennial remembers PCs, the days of early dial-up, and MySpace, but also feels comfortable on TikTok and Clubhouse.

clubhouse app

Whereas younger millennials don’t know a world without digital tools as a primary form of communication, the eldest millennials remember when they were very primitive.

“They were the first generation to grow up with a PC in their homes. They joined the first social media communities on Facebook and MySpace. They remember dial-up connections, collect calls, and punch cards,” Dhawan previously told Insider, adding they also remember things like Napster for burning CDs, as well as the regular flip phone. 

But while they’re fluent in the early days of the internet and digital technology, they’ve also been able to easily adapt to newer forms of digital media, like TikTok, which may be unfamiliar to older generations like baby boomers and commonplace among younger generations like Gen Z.

“This is a unique cohort that straddles digital natives and digital adapters,” Dhawan said.

 

But straddling a digital divide means the typical 40-year-old millennial is an asset in the workforce.

business meeting

With the skills of both older and younger generations, Dhawan said, they can bridge communication styles in the workplace.

For example, she said, a geriatric millennial would know to send a Slack message to a Gen Z co-worker instead of calling them out of the blue, which they might find alarming. But they would also know to be mindful of an older co-worker’s video background and help walk them through such technology.

“They can help straddle the divide,” she said. “They can teach traditional communication skills to some of those younger employees and digital body language to older team members.”

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Biden’s big jobs plan will actually hurt low-income and minority Americans’ chances of owning a home

compromises buying home
The Biden administration’s proposed American Jobs Plan would create new hurdles for minority and low-income first-time homebuyers.

  • The American Jobs Plan would make home ownership less accessible for low-income and minority home buyers.
  • If you can’t put 20% down when you buy a house, you have to pay mortgage insurance.
  • Biden’s plan would make private mortgage insurance more expensive.
  • Jerry Theodorou is the director of the Finance, Insurance and Trade Policy Program at the R Street Institute.
  • This is an opinion column. The thoughts expressed are those of the authors.
  • See more stories on Insider’s business page.

Homeownership is a pillar of the American dream. Last year, the pandemic made many Americans realize they wanted that dream sooner rather than later. Many turned to Redfin and Zillow, swiping through home after home as travel was restricted. News reports quickly followed of surging housing prices and increasing demand as renters turned into buyers and people looked for more living space.

On the surface, this news sounds like a boon to the American economy. Owning a home builds equity and intergenerational wealth, and it can be a cushion against financial setbacks. Yes, there are risks, as shown from the 2008 financial crisis, but American homeownership is still on the rise.

It baffles the mind, then, that as the economy continues to recover, the Biden administration’s proposed American Jobs Plan would create new hurdles for minority and low-income first-time homebuyers. In an effort to pay for the plan, the government would raise the cost of private mortgage insurance, potentially squashing the dreams of millions of Americans.

Inequity in homeownership

Minority and low-income families would be hit hardest by the new legislation because 40% of loans with private mortgage insurance are for families with annual incomes below $75,000, and 60% go to first-time homebuyers. The disparity between homeownership by Black families and white families is already significant – 42.3% of Black families own homes compared with 72.2% of white families. The Biden plan would only widen this gap.

Home buyers can pay as little as 3% of a home purchase price as a down payment. But for those who supply less than 20%, mortgage insurance must be purchased to protect lenders against a borrower defaulting. But private mortgage insurers must have sufficient financial strength to withstand the inevitable peaks and valleys in the cyclical housing market. Since the 2008 financial crisis, new regulations have required insurers to maintain sufficient capital levels to survive another downturn.

Insurers have strengthened their capital base by purchasing reinsurance – insurance for insurance companies. Think of it like a financial shock absorber that spreads risk globally and acts as a bulwark against crippling losses from catastrophic events. Reinsurance is so important for mortgage insurers that in 2020, US insurers shared more than 30% of their mortgage insurance risk with non-US sources. Bermuda reinsurers alone, for example, accounted for just over 50% of such cessions.

The failure of the Jobs Plan

This is where the American Jobs Plan enters the picture. First, it would increase the corporate tax rate from 21% to 28%. Second, it would impose a global minimum tax rate that dilutes the benefits of Bermuda reinsurance. For mortgage insurers, this will inevitably lead to higher prices. Currently, Bermuda reinsurers do not impose taxes on corporate income, allowing mortgage insurers to benefit from the availability of low-cost mortgage insurance.

These actions seem far upstream from the average home buyer, but the effects will trickle down quickly. A higher corporate tax rate for mortgage insurers will eat into their profits. To recoup these lost dollars, they will raise required mortgage insurance rates for all home buyers who put down less than 20%. Simple financial modeling suggests that rates could rise by approximately 10% overall, a significant increase for borrowers, pushing homeownership further away for those of lesser means.

The math is fairly straightforward. Mortgage buyers with excellent credit scores – more than 740 – who put 3% down on a $200,000 home pay approximately $9,500 for the mortgage insurance over eight and half years until the loan-to-value ratio drops below 80%. Borrowers with credit scores between 680 and 699, slightly below the national average, with the same down payment on the same home pay approximately $19,800 in mortgage insurance. Under Biden’s plan, those costs could increase by as much as 10%.

If the American Jobs Plan becomes law, the cost of insurance will rise, potential homebuyers will be affected directly, and, thus, the economy overall.

The Biden administration should stop building barriers to homeownership and instead support policies that will help first-time homebuyers, particularly the low-and-moderate- income families, especially in today’s low interest rate environment. One way to begin is to reconsider the proposed anti-free trade, anti-fair trade, globally-mandated minimum tax policies. The American dream depends on it.

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Should I buy a home right now? Here are the 5 things you should know before diving into the bonkers housing market.

plight of pandemic homeowners 4x3
Buyer beware: A number of factors have led to rising home prices, which makes taking the plunge into homeownership even more costly.

  • Low mortgage rates and the remote-work boom fueled home-buying during the pandemic.
  • The frenzy has depleted inventory, sent home prices soaring, and anointed new hot places to live.
  • This guide lays out the facts to know to help decide if you’re ready for homeownership.
  • See more stories on Insider’s business page.

The hottest pandemic purchase is a house.

One report found that 11% of Americans have moved since the start of the coronavirus crisis. Unmoored by remote work and driven by the desire to be near family or enjoy a lower cost of living, buyers have been snapping up primary residences and second homes, fleeing the coastal cities and flooding states such as Texas and Florida, as well as smaller cities, spacious suburbs, and vacation-home spots.

The mass relocations and purchases – coupled with the reluctance of existing homeowners to find a new place to live during a pandemic – have driven the number of homes for sale down to record lows, which in turn has propelled home prices to their highest rates in 15 years.

Intense bidding wars are commonplace. Take one California home that got 122 offers in two days. A May Zillow report found that nearly half the homes for sale in the US are selling in under a week.

Add that up and it’s harder than ever to break into the real-estate market.

Here are five things to understand in order to decide whether you’re ready to take the plunge into homeownership.

1. There’s a striking imbalance of supply and demand

Competition to buy a home is fierce.

There are more people who want to purchase properties than there are homes on the market. (There are even more real-estate agents in the US than there are homes for sale.)

Dwindling housing supply has fostered intense competition marked by bidding wars and all-cash offers.

The tightening housing market is goading prospective buyers into expensive homes that don’t ultimately fit their wants or needs. But for those with cash to spare who are prepared to compromise, now could be a decent time to scoop up a property.

Read more:

Buying a home is a lot harder than it was at the start of the pandemic. Experts say you should wait and avoid buyer’s remorse

April’s red-hot housing market saw nearly half of homes sell in less than a week, Zillow says

It’s actually a horrible time to buy a house

8 signs you’re ready to buy a house

3 reasons why the housing shortage will last for years, Goldman Sachs says

2. Buying a house is expensive even though mortgage rates are still low

Low mortgage rates and the desire for comfortable work-from-home digs have fueled a home-buying frenzy.

The spike in real-estate activity has absolutely depleted housing inventory and ratcheted up housing prices, meaning you could ultimately be overpaying for a property you’d be settling for anyway.

stella guan los angeles buy home regret ibuyer
Stella Guan had buyer’s remorse after beating out other eager bidders for a Southern California house that ended up having toxic mold.

Mortgage rates are still at historic lows, but the high home prices can cancel out the opportunity to get more house for your money and keep monthly payments affordable.

And don’t forget to budget for closing costs and insurance.

Read more:

The average homebuyer now needs to offer above asking price

Investors snatched up $77 billion worth of homes – a record – making it even harder for regular buyers to buy one

Homebuyers are getting slammed by record-high prices. Here’s when economists say they’ll finally ease up.

Most Americans think it’s a good time to buy a house even though they think prices will keep soaring, which shows just how irresistible the dream of homeownership is

Millennials are flocking to fixer-uppers because it’s the only way some can afford a home

3. Building a new home may not be much of an alternative

While existing listings dwindle – in part because homeowners are reluctant to resell their homes out of fear that they may not be able to afford their next one – a possible solution is to buy land and build a new house.

But the raw materials necessary to construct a new property have gotten exorbitantly expensive amid the pandemic. Logistics and shipping issues have resulted in long waits for certain supplies.

There’s also a finite number of contractors and workers to erect such homes. Those workers are in demand, meaning labor costs are also high. Builders nationwide are facing severe delays to complete new builds or even finish renovation projects on fixer-uppers.

Lumber
Lumber prices in the US are skyrocketing, adding tens of thousands of dollars to the cost of building new homes.

The added costs and delays slow down builders, lead to even more expensive home prices, and act as a deterrent to hopeful buyers.

Read more:

The price of lumber is wild right now and it’s a disaster for the already disastrous housing market

More houses will get built soon, Fannie Mae says – but maybe not as much as the market needs

The US is facing a shortage of nearly 4 million homes as builders struggle to meet exploding demand

The cost to build a house depends on the size of your home, but it’s generally more expensive than buying a home

Inside the business of a general contractor in Atlanta, where home renovation prices are in ‘bizarro world’ and backlogs are stretched to 12 weeks

4. Many popular places to live have become even more unaffordable

The pandemic emboldened many Americans – particularly employees who could work remotely – to ditch their big-city apartments and try out the suburbs, rural areas, or different states.

It led to booms in states such as Texas, Florida, Colorado, and North Carolina.

Buying a home in these newly popular areas may result in even more competition. Think higher prices and fewer houses to choose from.

Florida
Miami is one of the Florida hot spots that’s recorded a huge uptick in both buyer interest and property prices.

Read more:

The wealthy invested in ‘hidden gem’ locations during the pandemic, propelling property prices in smaller cities to new heights

Home prices are soaring across the US, but these 11 places are the wildest right now

Big cities are the clear losers of the coronavirus pandemic. Millions of Americans moved away from these 10 urban hubs.

We talked to people in 4 popular beach towns who said this summer is the wildest in years, with barely any houses left to rent and prices through the roof

Elon Musk decries Austin’s housing shortage and sky-high home prices. Peek inside the bonkers real-estate scene in the city Musk predicts will be the country’s ‘biggest boomtown.’

5. Do thorough research before making any offers

Over the past year, some have snatched up houses only to be met with buyer’s remorse, while others have happily profited from their real-estate investments.

House-hunting hopefuls can prepare to buy by establishing an emergency fund, determining how much to budget, and getting preapproved for a mortgage.

Read more:

Why finding a home shouldn’t be your first step toward buying a house

Confessions of pandemic homebuyers: 6 families open up about overpaying, losing bidding wars, and settling for fixer-uppers in a bonkers housing market

I just bought a house in a red-hot market after 5 rejected offers, and I have 6 dos and don’ts for anyone thinking about buying right now

I thought I wanted to buy a ‘dream home’ but had to settle for an ‘OK home’ in this wild market – and I couldn’t be happier about it

Millennials who snapped up homes in the hot real-estate market reveal their biggest regrets, from unexpected costs to high mortgage payments

Read the original article on Business Insider

A Black homeowner had her white friend represent her during an appraisal. The value of her home shot up by $149,000.

Home for sale
  • The Indianapolis Star reported that appraisers undervalued a Black resident’s home because of her race.
  • This undervaluation dates back decades to when Black neighborhoods were deemed financially risky.
  • Lawmakers introduced legislation in recent months to combat racial disparities in homeownership.
  • See more stories on Insider’s business page.

With the pandemic-era ability to work from home, the desire for homeownership has been on the rise this past year, with a housing inventory crisis developing as a result.

But the Indianapolis Star reported last week that Black homeowners who want to put their houses on the market or seek lower mortgage rates are at a disadvantage just because of their race.

The Star spoke to Carlette Duffy, a Black homeowner who had sought three appraisals on her home to start the process of refinancing her current mortgage loan. The first two appraisers valued it at $125,000 and $110,000, respectively, but when she had a white friend stand in for her during a third appraiser’s visit, the value of her home shot up to $259,000. She had suspected the appraisers were lowballing her because of her race, and she was right.

“I had to go through all of that just to say that I was right and that this is what’s happening,” Duffy told the Star. “This is real.”

Duffy and the Fair Housing Center of Central Indiana filed complaints against the mortgage lenders and appraisers, accusing them of undervaluing her home because of race with the Department of Housing and Urban Development (HUD), and her case is now in the hands of the government.

Duffy’s situation is far from unique. A 2018 study from Brookings found that homes in Black neighborhoods are undervalued by $48,000 on average, amounting to $156 billion in cumulative losses.

“That metric shows there’s racism in the housing market,” Andre Perry, a fellow at the Brookings Institute, told Insider last year. “There’s something going on in the practices and policies of appraisals, real estate agent behavior, and lending.”

Insider previously reported that Black Americans lag behind white Americans on homeownership, with Black people being denied mortgages at higher rates than white people, even though many are credit-worthy.

And studies have shown that there’s a long history of structural racism is the housing market, significantly setting back Black homeowners. A study from the Center for American Progress (CAP) found that federal, state and local policies have prompted housing discrimination through tactics to prevent Black Americans and Americans of color from building wealth through homeownership.

For example, President Franklin Delano Roosevelt’s Home Owners’ Loan Act and the National Housing Act in the 1930s had the goals of making homeownership more affordable, but when determining which neighborhoods would get guaranteed mortgages, the Home Owners Loan Corporation denied Black people access to mortgage loan refinancing “while perpetuating the notion that residents of color were financially risky and a threat to local property values,” CAP said.

That’s why lawmakers, led by Rep. Emmanuel Cleaver II of Missouri, introduced the Real Estate Valuation Fairness and Improvement Act in April to combat disparities in the real estate appraisal industry.

“Homeownership has traditionally been the primary way that Americans accumulate wealth,” Cleaver said in a statement. “High-profile cases of homes owned by people of color being devalued in comparison to homes owned by their white neighbors have renewed calls for federal action.”

The bill would create task forces comprised of civil rights advocates and industry representatives to respond to racial disparities in real estate valuations, and it follows a March letter from 35 lawmakers calling on the Federal Financial Institutions Examination Council to take action on housing discrimination.

Duffy told the Star that she wants justice and hopes that HUD will address discriminatory housing practices.

“I’m excited, vindicated, relieved, angry, extremely peeved since I can’t say the other expletives that were running through me at that point in time – destroyed that I had to go through all of that,” she said. “This is real … just being able to prove it is the hard part.”

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Jim Cramer bought bitcoin when it was worth $12,000 – and said he recently sold half his ‘phony’ portfolio to pay off a mortgage

GettyImages 507883672
CNBC ‘Mad Money’ host, Jim Cramer.


TV anchor Jim Cramer said he bought “a lot of” bitcoin when it was worth $12,000 and used some profits from his investment to pay off a home loan.

“I paid off a mortgage yesterday with it,” the “Mad Money” host said Thursday on CNBC, adding that selling half his portfolio helped him.

Bitcoin hit an all-time high of near $65,000 on Wednesday, and was last trading 4% lower around $60,600 on Friday. The digital asset’s price is up more than 105% so far this year.

“From the chart, I may be the only natural seller. But it was so great to pay off a mortgage. It was like, kind of, phony money paying for real money,” Cramer said.

“I now own a house – lock, stock and barrel – because I bought this currency.”

Cramer recently indicated he is bullish on crypto exchange Coinbase, calling it one of many “cult-assets” in the market.

In a podcast with crypto investor Anthony Pompliano last month, Cramer said he made a ton of money thanks to investing in bitcoin, and that it gave him higher gains than gold. He said he followed Pompliano’s advice and put half a million dollars into bitcoin over the course of a few days.

The TV anchor and former hedge fund manager has previously said companies are being negligent if they don’t consider adding bitcoin to their balance sheets.

“As far as a way to be able to have a pastiche of things to do with your cash, I’m all for it,” he told CNBC’s Andrew Ross Sorkin. “I think it’s almost irresponsible not to include it. Every treasurer should be going to boards of directors and saying should we put a small portion of our cash in bitcoin.”

Read the original article on Business Insider

Homeowners in Portugal are getting paid to have mortgages as negative rates spread

Aerial view of Funchal with traditional cable car above the city, in Madeira island, Portugal
A cable car in Portugal perhaps floats above some of those mortgage holders with negative rates.

  • In Portugal, mortgage holders are seeing negative rates – meaning they’re getting paid by their banks.
  • What was supposed to be a rare phenomenon has likely increased during the pandemic.
  • Meanwhile, home-buying in the US has become expensive and difficult throughout the pandemic.
  • See more stories on Insider’s business page.

How would you like to be paid to have a mortgage? Maybe you should buy a house in Portugal.

Some mortgage holders actually have negative mortgage rates – meaning their banks pay them interest. The Wall Street Journal’s Patricia Kowsmann reported on the phenomenon, which was rare pre-pandemic. Rates were originally allowed that low a few years back to help bolster the economy.

But in Portugal, mortgages are increasingly seeing negative rates, a consequence of low interest rates in general across the developed world. One consumer-rights group, Deco, told the WSJ that it estimated more than 30,000 mortgages had negative rates back in 2019, but that has more than doubled now. BPI, the bank for one of the negative mortgage holders profiled, said it has paid out over 1 million pounds in interest.

The negative rates aren’t just in Portugal; some mortgage holders in Denmark are also increasingly seeing interest. However, banks there have begun administering fees for deposits; in many instances, according to the WSJ, the fees can offset the interest that the mortgage holders are receiving.

Meanwhile, in the US, prospective buyers should be prepared to pay more than the asking price, as supply stays low and goes quickly. As Insider’s Taylor Borden wrote: “It’s actually a horrible time to buy a house.”

Yes, Borden writes, American mortgage rates are low, but prices are high, effectively pushing the American dream of homeownership out of reach. Also, as the American economy has started reopening this spring, mortgage rates have gone back above 3% again, and seem likely to keep rising.

But even for the lucky mortgage holders of Portugal, it’s not all smooth sailing. One person that the WSJ spoke to, Paula Cristina Santos, has had to halt her own plans for buying a house. One reason why: The charge from her bank to get a new mortgage is just too high – and can’t compare to her current negative rate.

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Surging lumber costs have increased the average cost of a new house by $24,000

lumber and building materials store
  • Lumber prices have skyrocketed since the pandemic began, adding $24,000 to the price of new homes.
  • Demand for materials soared during the pandemic as supply tightened with factories idle.
  • The National Association of Home Builders chair said vaccine rollout should help bring costs down.
  • See more stories on Insider’s business page.

While the pandemic hit the US, everyone seemed to want their own house. With mortgage rates at record lows and no need to commute to work in cities for at least 2020, prices soared everywhere. But they’re also soaring because there isn’t enough wood out there: lumber, to be exact.

Now it’s clear how much the lumber shortage is adding to the skyrocketing price of new homes: a whopping $24,000.

That stat is courtesy of the National Association of Home Builders (NAHB), which found the price of an average family home increased by $24,386 since April, with the market value of a multifamily home increasing by $8,998 over the same time period.

A report from the NAHB in February said the lumber supply chain impact came as factories shut down almost immediately last March for safety reasons, and then as demand spiked, supply couldn’t keep up. Lumber prices have jumped by almost 200% since April 2020.

“The elevated price of lumber is adding approximately $24,000 to the price of a new home,” NAHB Chairman Chuck Fowke told real estate news site HousingWire. “Though builders continue to see strong buyer traffic, recent increases for material costs and delivery times, particularly for softwood lumber, have depressed builder sentiment this month. Policymakers must address building material supply chain issues to help the economy sustain solid growth in 2021.”

Zillow’s Producer Price Index found that February’s 2.8% annual increase in sales was the strongest it had been since October 2018, meaning that while more houses are being sold, supply for building materials, like lumber, remain low and costly.

On March 12, the NAHB, along with more than 35 other housing organizations, wrote a letter to Commerce Secretary Gina Raimondo asking her to examine the lumber supply chain and look into solutions for the high costs.

“Housing and construction can do their parts to create jobs, boost the economy to its pre-pandemic strength, and provide safe and affordable housing for all Americans, but in order to do so the federal government needs to address skyrocketing lumber prices and chronic shortages,” the letter said.

Building 1,000 average single-family homes creates 2,900 full-time jobs and generates $110.96 million in taxes and fees, the letter said, emphasizing the economic benefits the government would reap in finding solutions to the expensive building materials.

Fowke told HousingWire that the continued rollout of COVID-19 vaccines will help decrease the costs of lumber since more mills will be able to safely reopen, and with more homes being built, home builder confidence should rise. (Homebuilder confidence fell by two points in March.)

The timeline on when material prices will decline is yet to be determined, but prices might start to come down with President Joe Biden on Monday promising 100 million COVID-19 shots in the next 10 days.

“Shots in arms and money in pockets – that’s important,” Biden said.

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