Marketplace - The renter-homeowner wealth gap

Episode Date: November 28, 2024

It’s probably unsurprising that homeowners are typically wealthier than renters. But a new report from the Aspen Institute shows how wide that gap is: $400,000 median net worth, compared to $10,400, respectively. How do renters catch up? Also in this episode: Older Americans move south to be near family, companies spend more on intellectual property, and a chocolatier in Maine preps for the holiday season.

The macro economy still looking strong. We'll look at the micro too. From American Public Media, this is Marketplace. In Baltimore, I'm Amy Scott in for Kai Rizdal. It's Wednesday, November 27th. Good to have you with us. Consumer spending gets a lot of attention this week, what with Black Friday and all, but businesses buy stuff too. And today, the Commerce Department is out with some new data on that spending. New orders for durable goods, products meant to last at least three years, increased slightly, two-tenths percent in October. And the department's Bureau of Economic Analysis is out with a revised estimate of third-quarter GDP. The

headline number remains the same. The economy grew at an annual rate of 2.8 percent. But one component that was revised upwards, what the BEA calls non-residential fixed investment, another measure of business spending. Marketplace's Stephanie Hughes has the details. The electrical contractor Kelso Burnett is based in Chicago. And in the last five years, the company's gotten more business installing solar panels in Illinois. As you can imagine, out in the middle of the cornfields, you know, they're buying up some property and they're building the solar farms.

William Martin Jr. is a branch manager for the company. To build those solar farms, his company has to install metal pilings that support the panels. Kelso Burnett had been renting equipment to do the work, but earlier this year, it decided to spend half a million dollars on its own pile drivers. William Martin Jr. We see a big market in the solar field area, so we dove right in and bought two machines. COLLEEN O'BRIEN His company also just bought some AI software to see if it speeds up the process of estimating

the number of electrical outlets a building might need. That could allow them to bid on more projects. It takes a little bit of time for everybody to kind of understand this new program, if we like it, if it's going to work for us. The software purchase is considered an investment in intellectual property, which is a growing part of GDP. In the third quarter, businesses spent more than $1.5 trillion in IP. Economics professor Ethan Strube at Carleton College says a lot of companies are experimenting

with AI these days. The only way to know how it fits into your process is to try it and to see if it actually is successful. Companies also spent more on transportation equipment in October. New orders were up 0.5% from the month before, according to the Durable Goods Report. Ryan Young, a senior economist with the Competitive Enterprise Institute, says that's a sign that automakers, for example, are stocking up. RYAN YOUNG They're buying now while it's cheap, anticipating

that prices might go up later if there are new tariffs or other policies. Remember, that durable goods report is from October. So the companies buying didn't know yet what would happen with the election. Young says they were preparing regardless. He says now that they know the outcome, companies that have been eyeing a pile driver, say, for a while, might be more likely to go ahead and buy it. I'm Stephanie Hughes from Marketplace. One more item from the Bureau of Economic Analysis. The PCE price index, the Fed's

preferred measure of inflation, rose at an annual rate of 2.3% in October, so still a bit higher than the 2% the Fed is aiming for. On Wall Street, a dip before the holiday will have the details when we do the numbers. Quick update on the housing market from the National Association of Realtors, which says pending sales of existing homes rose 2% last month. We hear all the time that home ownership is the main way people build wealth in this country. And of course, it takes some wealth to even become a homeowner. But some new data on the wealth gap between those who do own and those who rent is still pretty striking. The Aspen Institute finds that the median net worth of a homeowner is about $400,000. Renters? Just about $10,000. Marketplace's Samantha Fields has more.

Owning a home is one of the main ways people build wealth in this country, especially if they're able to buy when they're young. Chris Herbert at the Joint Center for Housing Studies at Harvard says if you can buy a house in your 20s or early 30s. And pay off that 30 year mortgage over time, you're going to build wealth much earlier and accumulate more over your lifetime. to build wealth much earlier and accumulate more over your lifetime. That's a big part of this story of homeowners having more wealth than renters. But it's not the whole story. Home equity only accounts for about half of the renter-homeowner wealth gap, according to the Aspen Institute. People with higher incomes are more likely to become homeowners, but they're also more

likely to have other kinds of investments. Vanessa G. Perry at George Washington University says those investments include stocks, bonds and 401Ks. Nearly 80 percent of homeowners have at least some of those, but less than half of renters do. There's a sort of ripple effect when you have home equity and you have the opportunity to stabilize your housing expenses, that affords a household more opportunities to gain more wealth. By paying down debt and putting money into savings or retirement. But with the huge run-up in home prices over the last few years, it's getting increasingly difficult for people to get into the housing market, especially without family money. So that does make it even more important for us to think about if you're a renter, how can you build that wealth as early as possible in your life?

Catherine Lucas-McKay is with the Aspen Institute's financial security program. One of the easiest ways is just by opening a retirement account. Or an investment account. And in recent years, McKay says that's gotten a lot account. Or an investment account. And in recent years, McKay says that's gotten a lot easier to do on your own. I'm Samantha Fields for Marketplace. We just heard from Sam about how hard it is to get a foothold in the housing market today. Now a story about folks a little further along in their housing and life journeys. Southern climes have long been a magnet for older Americans.

Just think of all the retirement and over 55 communities in the Sun Belt. But warm weather and golf aren't the only attractions. Many baby boomers are moving to be closer to their grandchildren. Heather Gillers is a reporter for The Wall Street Journal where she wrote about these so-called baby chasers. Heather, welcome to the program. Heather Gillers Hi, thanks for having me. Host So who are these baby chasing grandparents and where are they moving? Heather Gillers So they are generally sort of the baby boomer generation and they're mostly moving

south. And this is sort of the intersection of a bunch of different population trends that have been building. One is that we've seen sort of a 10 year growth in population of young families in the southern US, Texas, Florida, Carolinas. And then, you know, obviously, these are traditionally places where older Americans have retired to warm weather, golf, and now there's a new attraction, which is that a lot of their grandbabies live there. At the same time, the baby boomers are a generation that have accumulated a lot of wealth. Many of them, you know, have retirement portfolios that grew over a 10-year bull market.

They have paid off or nearly paid off homes. So they're sort of cashing out and moving south where, you know, they don't have to worry about high interest rates because they have this cash from selling their homes. They can buy a place and be near their grandkids. I wanted to talk about some of the data behind this trend story. How do we know? I mean, obviously there are a lot of reasons people move and you mentioned the South has been a destination for retirees for a long time.

How do we know that a lot of this is motivated by being close to the grandkids? There aren't census takers going from house to house saying to grandmas, did you move here to come see your grandbaby? But we do have a lot of information from the real estate industry and a little bit of demographic data that bears this out. So the National Association of Realtors surveys homebuyers and the age of repeat homebuyers is at a 40 year high right now. And the biggest reason that they cite for selling their homes is moving close to friends

and family. And then another trend in home building that kind of bears this out is that 55 and over communities within all ages communities have become very popular. So there's a clear trend of like older Americans wanting to live close, at least to somebody's grandchildren and potentially to their own families. Right. Or maybe their own children, even if they don't themselves have kids. Yeah. Talk a little bit about the economic impact of this group on the cities where they're moving.

As you said, these are folks that might have some accumulated wealth, a little more flexibility. Yes, yes. So the fastest growing city in the US right now, the fastest growing city over 50,000 is Georgetown, Texas. And about a fifth of its population lives in one giant retirement community. And it's just been great for the city. I mean, this year I got a triple A bond rating. I mean, these are people who they don't send their kids to school.

So that's a costly service that they don't make use of. They pay taxes, they own property, they have a lot of spending power. Like a statistic I like to cite is that people 55 and over make up for 45% of personal spending in the US. So they're generally like a credit positive as a fundraising agency would say, You know, they do use ambulance services, but a lot of the other sort of services that cities spend a lot of money on, this population is not gonna be a big user

of those services. Well, where do you see this going? Is there any way to know how lasting this trend might be? You know, another really interesting piece of this is that eventually someone like that may be doing a lot of childcare, but as kids need less childcare, these grandparents are also getting older and the US has a real shortage of care workers for older people. So as these grandparents age and the grandchildren no longer need care, they may find that they

are happy to be close to their children because they themselves need help. Yeah. All right, Heather Gillers wrote about baby-chasing grandparents making moves for The Wall Street Journal. Thank you so much. Thank you. Coming up. The cost of chocolate has gone up over the past year or year and a half. Sigh. But first, let's do the numbers. The Dow Jones Industrial Average fell 138 points, three-tenths percent to finish at

44,722. The NASDAQ subtracted 115 points, six-tenths% to close at 19,060. And the S&P 500 lost 22 points, just shy of 0.4% to end at 59.98. Holiday sales are expected to top a trillion dollars in the U.S. this year. And of that, about 160 billion worth, or 16%, is expected to be returned, according to a new analysis from CBRE. Checking in on some online retailers who have to deal with those returns, Amazon.com descended 1%, Walmart added 6 tenths percent, Target pocketed 2 and 8 tenths percent, and Etsy slid 9 tenths percent. You're listening to Marketplace. marketplace. Understanding personal finance can feel like an impossible task, but it doesn't have to

be that way. I'm Janelia Espinal, and on Financially Inclined, I'll guide you through simple money lessons that will change your financial future. Learn about credit scores, how to avoid scams, and why you need a savings account. Plus, we explore the brain science behind FOMO and what you can do to make smarter money decisions. Listen to Financially Inclined wherever you get your podcasts. This is Marketplace. I'm Amy Scott. We often talk about history on this show as context for what's going on today, but there are so many stories that slip through the cracks, missing out on their due, which is why I'm a big fan of The Memory Palace, a podcast launched in 2008 by Nate DeMeo,

who I should say is a Marketplace alum. The Memory Palace features unexpected stories of people throughout history, both the not-so-famous and the famous, like Guilhama Marconi, known as the father of the radio. Marconi became convinced that sound never dies. That sound waves, once emitted from a radio from the vibrating strings of a Stradivarius, from whispering lovers or a baby discovering how to make a baa or guh sound for the first time, lived on forever, flowing permanently but growing weaker and weaker with each moment. Just hadn't yet managed to build a radio powerful enough to tune in the signal. AMT – Nate DeMeo is now out with a book based on the podcast called The Memory Palace,

True Short Stories of the Past. Nate, great to talk with you again. Nate – Oh, it's the best, Amy. So happy to be here. So you've had this successful beloved podcast for more than 15 years now. Why write a book? I have always sort of wanted to do a book. Not only is it helpful to have a book as a business and not only is it, you know, a good thing to do. Boy, do I love books. And I would think about the books that I had as a kid, these sort of collections of, you know, a good thing to do. Boy, do I love books. And I would think about the books that I had as a kid, these sort of collections of, you know, short pieces. Like, I would stay home from school sick, and I would pick up for like the 12th time,

you know, some collection of Ripley's Believe It or Not stories. Or I would look again, you know, for the thousandth time at where the sidewalk ends, the collection of short poetry. And I always wanted to collect stories from the Memory Palace, sort of old and new, and that might be like one of those books that I had as a kid and loved as a kid that don't really exist for adults and make one for adults about adult concerns. Hmm. The name Memory Palace, I assume, comes from a technique that people use to remember

stuff. Can you talk about that and how it inspired you? Sure. I mean, you know, I think, I believe it was Cicero. It might not be, despite the fact what I do for a living. I often, you know, I get the facts right on air, but I often get the facts wrong off air. But yeah, so back in the day, you know, he came up with this technique that people would, you know, walk around a space that they knew really well in their imaginations, like maybe it was their childhood home. And people would remember the speech that they were trying to say and remember Fourscorer

and seven years ago today. And they would do that while remembering, you know, the entryway to their parents' house. I like the notion of that we're creating this imaginary space again, where, you know, the entryway to their parents' house. I like the notion of that we're creating this imaginary space again, where, you know, by telling the story of Karlo Wilenda, the last of the original flying Wilendas, who died not too long ago. Thank you. As, you know, from natural causes, which is an incredible achievement in her family of people who died, you know, usually in pain on their backs on the floor underneath some tightrope.

In spectacular fashion. Yes, exactly. Like, you know, that when I tell that story, and even when I just speak it right now and give you that image of a failed acrobat and one who happened to make, live a long life, it kind of does hang with you in your imagination. And the Memory Palace felt like an appropriate name in that way. There are so many beautiful stories in this book. Many of them existed in audio form on your podcast,

but you also turn the lens on yourself and your own family for several chapters. So you find this picture of your grandparents at the beach that complicates this story that you had been telling yourself about them. Can you talk about that and just how it kind of informed your thinking about history? Yeah, absolutely. At large? Sure. You know, and living in that house, I would, was exposed to all of these sort

of different artifacts of my own family. And there was this one photograph that everybody in the family had of my grandparents, you know, young and attractive in the early 1940s, clearly in love, you know, with their arms around each other on the beach. And this was a story that – this was a day that I had heard about from my grandmother a million times. She would talk about the day that she went to the beach with my grandfather, and they rode back in St. Steuder Baker, and they piled him to the back, and she had to sit in his lap. And as they were sitting there, the charge between them, she realized that she was in love, and I'd heard this story forever. And here was this incredible picture. But then I also found

this other photograph. And in this photograph, they are not sort of intertwined. They are not beaming with love. They are just kind of sitting next to each other in what almost feels like discomfort. But the implications of these two pictures were remarkable. That maybe the picture where they're lovey-dovey was the second picture. And maybe the photographer, and I never even thought about who this photographer would be. They seem uncomfortable. He said, hey guys, I know what's going on with you two, like who are you trying to kid? Or maybe he's like, come on, let's come on, like give me some action here.

I don't know what it was. But there's something to me about that second photograph that speaks to all those in between moments, all the life we live between the stories we tell ourselves about our lives, that is where life takes place. And that is where I like the Memory Palace to live. So back to the podcast where this all started. The economics of the industry are really difficult right now, especially when it comes to ad sales.

But you've been keeping this going now more than 15 years. How are you staying afloat? And are you optimistic that you can keep doing what you love to do and have done so well? The answer kind of is it has sort of ever been thus, right? The way that I was doing this thing and the way that it was, you know, sort of particularly sincere and particularly idiosyncratic, the stories themselves in their idiosyncrasy and in their sometimes strangeness were drawing people to it. And as the podcast serial suddenly sort of like lifted all boats and if you happen to be in the water at the time, there was suddenly a way to, you know, to draw advertisers to

you. And there were always ways throughout that I could have stepped it up in a certain way and maybe produce them more frequently. But I realized in producing more frequently, they would not be as good. And that is, of course, the way that every creative person in every sort of creative industry is wondering what they're going to do next. Like, as we expand, will the service that we provided, and in my part, that service

is ridiculous. It is writing tiny little, deeply earnest stories focused on wonder about the past. Like, that is a weird product to sell. I wouldn't call it ridiculous. Okay. It's very, very important and moving. Well, thank you very much. Nate DeMeo, creator and host of the Memory Palace podcast and now author of the book

by the same name. Nate, so great to talk to you. Congratulations and thanks for joining us. Couldn't be happier to be here, Amy. Okay, now to chocolate. Shop owners like Kristin Talheimer Bingham of Dean's Sweets in Portland, Maine are gearing up for the holiday rush. We checked in to see how she's doing. The season is upon us and we are very happily busy. Everyone is working extra hours, starting early and staying late. Our two stores are bustling, our phone is ringing. We've been working the past six months to make sure that these holiday weeks are the best they can

possibly be. And every year we challenge ourselves to do the holidays better. I think a lot of people are already aware that the cost of chocolate has gone up over the past year or year and a half due to some pretty tough climate issues that have affected the cocoa growing regions. We've watched as prices of chocolate and cocoa have gone up at least three separate times in the past year, totaling about a 20% increase in the cost of dark chocolate and a 40% increase in the cost of milk and white chocolate. In our store and in conversation with customers, I've been watching for signs to see whether spending is up or down and whether people are being careful in their purchases or shopping

without a lot of worry. And I'm happy to say that at least in our small chocolate world, I see signs of a good season ahead. I'd like to think that every year we as a team get a little smarter about how to prep for the holidays and especially how to build the inventory that will get us through from Thanksgiving to the end of December. And as much as we plan and look at our numbers and anticipate, there are always going to be surprises.

Surprise orders are really the best because if we've planned well and built our inventory, we're able to jump on those surprises and get the chocolate out the door quickly. And that's what builds the business, not only for this year, but hopefully also for the coming years. So even though we've been working for months to get ready for these next few weeks, it's actually still early days for us. But then after Thanksgiving, everything turns up a notch, a big notch. So our test each year is to keep our energy up, to take breaks when we need to, and to work through this holiday season. This final note on the way out today, something to consider as you load up your dinner plate

tomorrow. The non-profit ReFed estimates some 316 million pounds of food, more than half a billion dollars worth, will go to waste this Thanksgiving holiday, including the equivalent of more than 8 million turkeys. And I didn't realize so many people don't even like turkey until I read this quote from journalist Brian McManus and Vice, who wrote, It is almost without fail a dried-out, depressing hunk of sun-baked paper mache, a jaw-tiringly chewy, unsatisfying, and depressingly bland workout. Whatever your feelings

about turkey, that's some juicy writing. Our media production team includes Brian Allison, Jake Cherry, Jessen Dooler, Drew Jostad, Gary O'Keefe, Charlton Thorpe, Juan Carlos Torado, and Becca Weinman, Jeff Peters is the manager of media production. And I'm Amy Scott. We'll be back tomorrow. This is APN.