The Family Estate

More and more, I hear from my friends that when their kids go to college, they aren’t planning on immediately moving and downsizing to a smaller pad. They say that with real estate prices being so high, they can never imagine that their kids will have enough money to buy their own home.

So, they plan on staying in the house, until their kids get married, have kids, and need a bigger space in a town with good schools. Then they’ll give the house to their kids. Some plan on living in the house with the kids and their families; others imagine moving to another state with cheaper housing costs.

I got a cold call from a real estate agent last week, who asked if we were willing to move, because she had a client who wanted to move to our block. We do live on a good block. We’re the worst house here, which is awesome and fabulous. We’re the house with the cars that get towed away and is desperately in need of new siding. My neighbors back their BMWs into the driveway, so they are facing front.

And Steve wants to dig up the backyard to expand his organic farming project. Hahahaha. That’s going to go over well with the neighbors who hire professionals to light up their yards for Christmas.

But I’m rambling. The point of this post is a small trend alert. Middle class families don’t think their kids will ever be able to buy a house on their own. That’s sad.

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28 thoughts on “The Family Estate

  1. Some plan on living in the house with the kids and their families;

    That’s why you need to look gift horses in the mouth at times.

  2. Anyway, last time I looked up the numbers, you could afford the median house on the median household income here. House prices have been creeping up, but not as fast as other places.

  3. #1 and #2 both seem to expect to move home after college while they marshall their resources. (#3 intends to shake the dust of home from her shoes As Soon As Possible). #2 has expressed an interest in inheriting the place, how very French…

  4. Well, but it seems you live in one of the most expensive areas in the country (and thus, probably, one of the most expensive areas in the world.) https://www.usatoday.com/story/money/2018/12/17/these-are-the-most-expensive-zip-codes-in-2018/38693069/

    (Four of the top fifty most expensive zip codes are in the New York/New Jersey area.)

    It’s a big country.

    Would the people who plan to live with their married kids have wanted to live under their in-laws’ thumb, back in the day?

  5. I think there are a lot of different things going on behind your anecdote — an expensive area of the country (for us, one where the prices of houses have increased a lot in the last 20 years), a increased perception of risk, potentially actually increased risk, kids who are looking for meaning/wealth in jobs, “helicopter” parents who have been a lot more involved in their kids lives, among them (which means both that they want to be there for support, but also that they aren’t looking with particular eagerness at the next phase of their lives).

    I have to remind myself (and, yes, I want to hear from all of you) that kids really do launch, even in this age where we read too many stories about stagnation. The two 20 somethings I know well both had stints at home (during college & during grad school). One has officially launched, in his own home, in a nearby city, living with his fiancee. The other is well on her way to launching. But, they did both use their parents’ house as a launch pad, comfortably and mutually beneficial (the first actually participated in saving his father’s life when father had an early heart attack — a dramatic instance of mutual benefit).

    1. bj said,

      “I have to remind myself (and, yes, I want to hear from all of you) that kids really do launch, even in this age where we read too many stories about stagnation. The two 20 somethings I know well both had stints at home (during college & during grad school). One has officially launched, in his own home, in a nearby city, living with his fiancee. The other is well on her way to launching. But, they did both use their parents’ house as a launch pad, comfortably and mutually beneficial (the first actually participated in saving his father’s life when father had an early heart attack — a dramatic instance of mutual benefit).”

      Wow!

      The stats on this are that a lot of young adults are living at home, at least while single, so it’s something to be prepared for.

      https://www.cbsnews.com/news/percentage-of-young-americans-living-with-their-parents-is-40-percent-a-75-year-high/

  6. We downsized to a slightly bigger house on 15 acres in the middle of the woods. The kids are not interested in living with us. They do like the vacation feel of the house, especially with the new hot tub, and we welcome their visits.

    One lives 25 miles from us, in Minneapolis, sharing an old house with 4 others. The other, in Long Island City, looks at Zillow and is always planning how to get a house/mortgage instead of that crazy NYC rent. Looks like an adventure.

  7. That’s not a very rational plan. A large house has substantial negative carry. It would make more sense to sell the house, buy one the right size, put the extra money in the stock market (or, if you firmly believe that real estate will outperform stocks, put the extra money into income-producing real estate), and give your kids money for a downpayment (or the whole payment) when they are ready to buy.

    1. But maybe you like the house and hate moving or recognize that the day may come when you won’t be able to live alone…

      When I’ve mentioned eventual downsizing to my husband (our current house is nearly 3,000 sq. ft.), he points out that our current house is a nice size for living with young adults/hosting married children and grandchildren eventually, etc. And that’s true–I believe it was originally built for an older European with adult children at home.

      Our former next door neighbors were a bit older than us, and they sold a house the same size and moved into a nearly 4,400 sq. ft. house. They moved an elderly mother in and also they have a rapidly growing grandkid population.

    2. That financial advice depends on how quickly the cost of housing is increasing in the area where you hope your children will live (though you do have to include the negative carry costs). In the US I think equities have outperformed housing (especially the family home), in general, historically, but clearly that has local differences.

      The stock market might outperform the housing market (especially after you take taxes/insurance/upkeep into account). But it might not. Clearly all sorts of non-economic interests come into play, but it doesn’t have to be an economically bad decision.

    3. We watched the “Australia’s best home” series on Netflix, and a recurring theme, in the Australian houses was to build houses that would keep children at home, or bring them to visit a lot, among the affluent set building fabulous homes. It was a little bit weird, but there definitely seemed a notion of building family estates among the grandparent and parent of young adult set.

      1. ” It was a little bit weird, but there definitely seemed a notion of building family estates among the grandparent and parent of young adult set.”

        Some of this may be wishful thinking, though.

        You know how on HGTV, people are always talking about how they want a good space for entertaining–and you just know that they don’t entertain that much.

      2. I do entertain a lot, and I don’t know what they mean by good space for entertaining. I just shove the regular table into the corner and haul out the big table (folding legs) and the folding chairs. Good to go.

      3. Tulip said,

        “I do entertain a lot, and I don’t know what they mean by good space for entertaining. I just shove the regular table into the corner and haul out the big table (folding legs) and the folding chairs. Good to go.”

        I kind of understand what they mean, because our current house is a “good space for entertaining”: there aren’t any dead ends and each public area is good-sized and the kitchen is big enough to fit a table that seats 8-10 and we’ve hosted two grad potlucks here in the last year (30-40 people). And, *cue harps* we have a downstairs powder room. So, it really is a better space for entertaining than any home we’ve previously lived in. BUT, at the same time, it’s not like we have large groups over even every month…I think it’s a little bit crazy to spend vast amount of money to optimize your house for something you only do a few times a year, if at all.

        My read on the “good space for entertaining” thing is that people are trying to optimize their homes (or feel that they ought to optimize their homes) for a fantasy life that they aren’t actually going to live.

      4. AmyPm I think a lot of the attraction is that the couple you have over for dinner see the house and admire your wealth/taste/foresight.
        We do an awful lot of potlatch stuff – driving around in seventy thousand dollar cars when a six thousand dollar used car would do as well for us.

      5. If you’re inviting people just to show off, and they’re accepting to snoop, rather than because you enjoy each other’s company or want to celebrate with them, then you all deserve each other Dave.

  8. Even with a completely average sort of job, kids who live at home for a year or two have a nice downpayment on a townhouse/condo. I would have done it if I could have, back in the day. My oldest is planning on it, at least at the moment. I always wondered why parents talked about charging their kids rent for living at home, assuming they have a job and a plan–this is a low or no-cost way of giving your kids money, and charging them rent just means they’re more likely to move out and give that money to a landlord instead of saving it to achieve true independence later.

    My kids would not be able to afford our house in all likelihood–selling it at a lower cost would be too big a gift for us. But we can TOTALLY let them live at home for a while, in order to save up. Why did we ever get away from that sort of model?

    1. I agree. My kiddo had a lecture on finances at her (mostly rich kid) school which reminded the kids that loans and credit cards were not free money. That lecture started a discussion in our house about how we managed finances when we had less money. We noted our main rules 1) don’t spend more than you are earning (we calculated this annually, but without #2, we would have done shorter term) 2) a reasonable emergency savings fund (which came from a small inheritance) and 3) no credit card debt (which also depended on #2, because it meant that necessary expenses could be averaged over a year without paying interest). 4) a backstop of parents who would help out, offer a place to live, . . . . if necessary. But, I do not know how we would have saved for a downpayment without #5, a significantly increasing income.

      I think helping your kids along (when you can afford it), by offering a place to stay, a gift in the form of emergency funds, when you can afford it are reasonable choices to make when your children are on track and have the right attitude and values.

  9. Lisa SG said,

    “I always wondered why parents talked about charging their kids rent for living at home, assuming they have a job and a plan–this is a low or no-cost way of giving your kids money, and charging them rent just means they’re more likely to move out and give that money to a landlord instead of saving it to achieve true independence later.”

    Because they would like the kids to move out?

    I think the plan you outline is very workable, assuming a good enough local job market). I’d personally tweak it a bit to make required savings part of the deal.

    “My kids would not be able to afford our house in all likelihood–selling it at a lower cost would be too big a gift for us.”

    We only own our house–the dirt underneath it belongs to the college, and we’re only allowed to sell to other faculty or staff. So we can’t actually leave our house to kids, unless one of them were to be faculty or staff at the college.

    That’s a somewhat sticky detail (it made getting a mortgage way more of a pain than normal), but living so close does a lot for our quality of life, even with the built-in impermanence.

  10. We told our oldest we would charge rent, after a grace period of a few months. It helped that child to decide to pursue a foothold in the city. It was a gentle push out of the nest.

    A couple of years down the road, and that nestling is living independently with friends, pursuing fulfilling work, in a serious relationship, happy–and not returning to our suburb. There are many more jobs available for a liberal arts major in the Big City than in our suburb.

    The child did report that friends found our plan to charge rent to be barbaric. (Whatever.)

      1. Well, I know my city child tends to eat dinner after 9 pm. The multiple jobs are not 9 to 5, and the work week is much more than 40 hours. There are many friends living in this city, which makes it easy to have in-person social contact. And I am not tempted to try to impose “my house, my rules.”

        The greater risk of living at home in the city would be the loss of this time of young adulthood, in which the child has to figure out how to find a plumber/dentist/pet sitter, while keeping the boss happy.

        Multiple classmates, from middle school, high school, college & summer camps are living in the city at the same age. It’s a busy, great experience. I predict many of the same-aged friends will decide to attend a graduate or professional school in the next two years or so.

        In comparison, the suburbs do not hold the same density of same-aged contacts, nor is there the same opportunity to network. (By the way, the ability to use social media in a business context is a valuable skill. Quite a few of the kid’s friends are using all the skills the pundits deplored–instagram, memes, etc.–to reach customers for their employers.)

      1. My parents charged “rent” but it was really a contribution to shared costs like utilities and food and less than the going rate for rental property. I do have friends whose parents expected nothing and who basically lived for free with them while being able to both party and save money. It was a bit of a shock to them how much food and utilities cost when the moved out.

  11. I’ve softened up a lot with regard to my instinctive WASP dread of having young adults living at home.

    However, I still think that newlyweds should not be sharing a kitchen with either set of parents. You need more space than that to iron out how you’re going to do stuff.

    1. We kind of like having them around, so not dreading. We do have an accessory kitchen in the basement (how Italian of us!) which should make it easier some ways.

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