Parents Co-Signing Mortgages Has Election Implications

Plus, a funny and engaging new film by my brother 

Ric Edelman: It's Wednesday, August 14th. Has your son or daughter asked you to cosign their mortgage? Cosigners on mortgages are at the highest level in 30 years, according to Freddie Mac. In 1994, take a look at all the first-time homebuyers who are under the age of 35. 1.6% of them had a coborrower who was 55 years or older. In other words, young people getting their parents to cosign. 1.6% back in 94. Today, it's 4%. That's a huge increase, and not only are homebuyers in their 20s and 30s and 40s increasingly asking their parents to cosign the loan, more than ever, the kids are asking for you to give them cash to help them with the down payment. 12% of homebuyers this year have gotten money from friends and family for the down payment. And for buyers who are in the ages 25 to 33, almost a quarter of them got cash from others.  

So think about this, how many people who want to buy a home can turn to parents or friends for cosigning mortgages or giving them cash for the down payment? That assumes, or, frankly, demands that you've got the financial wherewithal yourself to sign that document, to write that check. What about all of those who don't have such resources, who either don't have strong relations in their family, or whose family simply don't have the financial capability to cough up that cash. These folks are renting, and in many cases, their rent is free because they're living at home with mom and dad. Those numbers are also the highest in decades.  

Just a few years ago, mortgage rates were 2.6%. They're now about 7%. And at the same time, home prices are at all-time highs. The median is $420,000 and Goldman Sachs says home prices are going to rise another 4% by the end of the year. 

All of this means that home affordability is at a historic low. And getting financial help to buy a house is not the only help that people need. In the past 12 months, nearly half of all adults in their 20s and 30s got financial help from their parents. They use the money most often for household expenses like groceries and utilities. 

Think about all this. Think about this from the perspective of the would-be homebuyer. First of all, they're saying to themselves, I cannot believe how expensive homes are. I can't believe the price of that house, and I can't believe how high the interest rate is on that mortgage. You combine the two and you end up with a monthly mortgage payment that is astronomical, a huge percentage of my income. 

No way I can afford this. So, I need to ask mom or dad to give me money so I can come up with the cash for the down payment. And I need to ask mom and dad to cosign the mortgage for me because I don't have the credit score, I don't have the credit record, I don't have the credit history to qualify for the loan. Even if I do have the down payment, I won't get approved for the loan. How does that make me feel as an adult? Having to, you know, beg mom and dad for cash and a signature. That isn't making you feel very good, is it? And what about mom and dad? They're in their 50s, they're in their 60s. They're getting to the point in life where the old adage of out the door by 24 is over, that I got my kids, I raised them, and I put them through college, and now that that's over and got them off married – isn't my work done, aren't I finished? No, the kids in their 20s and 30s are still living home with me and when they do want to go out and buy a home, they don't have the cash to do so, I've got to come up with 10 or 20 grand to give them. And they still don't qualify for the mortgage. Now I have to put my financial life under liability so that if they don't pay the mortgage, the mortgage company comes after me. How does that make me feel?  

The bottom line is, I think the combination is that an awful lot of Americans are unhappy about the economic circumstances that they're finding themselves in. It used to be that owning an American home was the American dream. I believe that still remains true. But more than ever, that American dream seems elusive. And that can't possibly be making people feel very good. And we take all of this, and we turn, of course, to the election. And what we see is what we see in every election. The economy is the number one political issue of the day. According to all the polls this week, the economy is the number one issue that people are focusing on in the election. Immigration and abortion come in second and third.  

What it means is that people are going to be thinking about the economy when they go into the voting booth in November. As it stands right now, all of the swing states say that the economy is the number one issue, and we are seeing in this mortgage and home ownership data that people are struggling to buy homes, they're struggling to maintain their homes, they're struggling to keep their homes because of the incredibly high costs of home ownership compared to 10 and 20 and 30 years ago. 

You're telling me that it's not the economy, stupid? I'm afraid it really is, and this is what is confronting both Donald Trump and Kamala Harris as they enter the final leg of the campaign season. As it stands right now, Kamala has an uphill battle, despite the fact that the polls are currently showing that she's performing well against Donald Trump, many people are just dismissing that as democratic convention, a honeymoon environment. I don't know. We're going to have to wait and see.  

The bottom line is the residential real estate market is in an unsustainable situation. Too few people can afford to buy homes. There are too few homes on the market, and interest rates are too high. This isn't a scenario that any politician would want to see. 

Hey, I've got a bit of good news for you. You need a distraction from all of this mess from the environment that we're finding ourselves in, not just the real estate market and the election environment, but look at what's happening in Ukraine and Israel and all the other issues that we're facing around the country and the world. 

Let me give you a respite. I want to do a little bit of bragging here. My big brother, Larry, has just released his documentary as a free stream on his website. I'm really excited about this. My brother created a film called the Canote Twins. This is a documentary about twin brothers who are among the most influential people in the world of old-time music. 

So if you're a fan of Appalachian Mountain music and early Americana, you will absolutely thoroughly enjoy this movie. Even if you're not a fan of that type of music, at a recent film festival where Larry participated, the film was voted audience favorite. It's a ton of fun. These twins are just incredible guys. They're well into their 70s now, maybe beyond. They've been performing music together their entire lives. The influence they've not only had on this genre is pretty incredible, but they are just two of the funniest people you'll ever encounter. Larry did a really good job of capturing this. The film has been available at film festivals around the country, and now it's a free stream for you at home. You can watch it for free. The link to the film is in the show notes. So, enjoy. Here's the official trailer. It really conveys just how much fun this film is.  

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Trailer: The Canotes, they're kind of unforgettable. You cannot help but be drawn in as an audience member or just as someone hanging out. The way they can weave in their personalities to the musicianship, it's really hard to watch them and not feel happy. When you try and think of what is that “it” that gives them so much magnetism, their music is so infectious, their personalities are so engaging, and their sheer joy in each other and in those around them just brings people together. You just end up laughing a lot. There isn't a lot of, uh, kind of melancholy hanging around with those guys, you know? It's, it's pretty much on the other end of the scale. They have brother comedic timing. Like, the way they work off of each other is just impeccable. You have to laugh and this polished musicianship meeting impeccable comedic timing is like irresistible. 

Their music's just so inseparable to me. I mean, Greg can play with anybody, Jerry can play with anybody, and it'll all be good music. But when the two of them are together, they lock in it in a way that nobody does. My mom used to say that we had cribs kind of opposite sides of the room. And in the night, we would stand up and rock the cribs so that they would walk toward each other and then they would touch it. One of us could climb into the crib with the other guy. Ha ha ha! And mom would come in in the morning and we'd be sleeping together in one of the cribs. So, it must have been then that I realized that I was a twin, and I liked hanging out with my twin. They were just so much fun to be around. I had to be around them. And so, I decided to tour with the twins. You see them and you go, gee, isn't it nice? They're happy right now. No. They're always happy. And it feels really good. They created this sense of home and community through their music. Greg and Jarrett have such a place in my heart, in the heart of so many of the kids that grew up going to this camp. They represent this playfulness, pure joy and laughter, the funness, the happiness. They've influenced so many lives. I can't think of anybody else who does the thing that they do. They're unique and great. Yeah, I just can't think of anybody who would be able to fill their shoes if they weren't around. So just be HAPPY! Happy, happy, happy, happy, happy, happy, happy, happy mama. Give me that broom I'm so happy I clean my room. Give me that broom I'm so happy I clean my room. Give me that broom I'm so happy I clean my room. 

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Ric Edelman: I’m glad you’re with me here on The Truth About Your Future. If you like what you're hearing, be sure to follow and subscribe to the show, wherever you get your podcasts, Apple, Spotify, YouTube – and remember leave a review on Apple podcasts. I read them all! Never miss an episode of The Truth About Your Future. Follow and subscribe on your favorite podcast app. I'll see you tomorrow. 

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Links from today’s show: 

Become Certified in Blockchain and Digital Assets: https://dacfp.com/certification/ 

The Canote Twins film by Larry Edelman: https://thecanotetwins.com/  

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