“Home is the place where, when you have to go there, they have to take you in.”—Robert Frost

I have always liked this humorous quote about what “home” is, but there are two powerful words embedded in it: “have to.”
In independent financial services, we are armed with tools, products, approaches, and solutions to meet people right where they face “have to.” This is nowhere more in evidence than in the sphere of home.

Home is defined as:

• “one’s place of residence”
• “the social unit formed by a family living together”
• “a familiar or usual setting: congenial environment”¹

I would add that home is where life happens and where responsibilities converge.

Benefits and Responsibilities of Home
The Eastern Tent Caterpillar is a familiar pest for people living in Eastern North America, especially in the Northeastern United States. From Canada, South to Florida, and West to the Dakotas and Texas, they defoliate trees and build their unsightly tents.

As adults, they are moths that are fluffy, tan to light brown in color, and have two white, oblique stripes on the wings. Quite handsome, actually.

As caterpillars, they are hairy, mostly black with a white stripe down the back, featuring brown and yellow lines along their sides, and they have a row of oval blue spots on the sides. Again, fairly good-looking.

The adult female moth lays 150-400 eggs in masses that are covered with a shiny, black varnish-like material. These egg masses encircle branches that are pencil-size or smaller in diameter. The animal overwinters as eggs. The eggs hatch about the time that the trees’ buds begin to open, usually in early March.

Let’s focus on their nest. Eastern Tent Caterpillar nests are commonly found on wild cherry, apple, crabapple, and similar rosaceous trees. After hatching, they form web tents through collective effort. The individual caterpillars weave silk from their salivary glands. During the useful life of the tent, the caterpillars each continue to add to it to increase the space it affords. These tents occur in the crotches and forks of branches in Spring and early Summer. These tents serve multiple benefits for the caterpillars:

• Warmth in the early Spring against the cold of night and risk of frost
• Protection from predators and parasitoids
• Protection from heat of the day in Summer, or from rainy weather

Problem: These creatures eat leaves, and the leaves are outside the nests. They must travel outside the nest to forage. They “have to” take time from foraging to work on the nest. “To have a home is to incur costs: It has to be made, and it takes time, energy, and expertise to make, and the wherewithal to travel to and from it.”²

Point: To have a home is to incur costs. It requires maintenance. It provides a base from which all of life flows.

Intersection of Financial Planning and the Home
The English word, “economics,” is derived from the Ancient Greek word οἰκονομία (oikonomia), which is the combination of two Greek words, “Oikos” meaning household, and “Nomous” meaning management. Interestingly, when we speak about the economy, we generally mean the entirety of the activities of all the people. However, managing the economy starts at home.

Home ownership and financial planning are actually closely intertwined in many ways, including:

• Life Insurance: A top reason for owning individual life insurance is to cover the outstanding mortgage at the time of death.
• Disability Income: No one wants the family to have to move because a disability restricts employment and lost income prohibits making monthly mortgage payments.
• Adequate Property and Liability coverage: Although the risk of not insuring the home could be devastating financially, “12 percent of homeowners in the U.S. do not have home insurance, according to a 2023 survey by the Insurance Information Institute (Triple-I) and Munich Re.”³
• Net Worth: The value of a home is an important factor.
• Liquidity: The equity in the home can be important leverage.
• Tax Planning: Homeowners can deduct certain expenses and interest payments from their taxes.
• Goals and Objectives: A desire to own a larger home, or second home can weigh heavily on choosing between alternative uses of future income or current savings.
• Home Equity Conversion Mortgage (HECM): A reverse mortgage can be an option for seniors who have equity in their homes and want to remain in their homes or supplement their income.
• Emergency fund: Home repairs can be expensive.
• Cash Flow: A homeowner’s monthly mortgage payment can be a sizable portion of the total family budget.
• Emotional Perspective: Whether or not it makes logical sense, a homeowner may prioritize paying off a mortgage over other possible uses of income just to have the security of living in a home debt-free.
• Estate Planning: Homeowners can pass on their home to children and grandchildren by either selling or gifting it to them while still alive, bequeathing it when they pass away or signing a “Transfer-on-Death” deed in states where it’s available.

Point: To own a home is to incur financial obligations over a long period of time and experience short-, and long-term financial consequences.

Focus on the Home
As an independent financial professional (IFP) you need to pay attention to cultural and economic swings that often impact the very place where people live. Many cultural forces combined with economic forces cause fairly dramatic shifts in when people enter the housing market, where people choose to live, and what accommodations they prefer.

Generational Differences
Home ownership is heavily impacted by generational shifts. “Millennials adapted more quickly to new technology than older adults and were the first to prefer consuming content online. They also disrupted consumer behavior patterns by forming their own brand of life stage priorities. They now make up the largest share of what should be the homebuying population. Millennials shifted the timing of various life stages, represent the most racially and ethnically diverse adult age group, and earn more than prior generations.”⁴

According to the Freddie Mac Single Family Marketing Analytics, Market Research, and Insights Department:

1. Millennials’ homeownership rates lag behind those of older generations.
2. “A significant share of millennials have yet to mature into homeownership, as many of them either haven’t reached the life stages that typically prompt a desire to own a home.”⁵
3. The Millennial generation is at risk of never reaching the same homeownership levels as older generations because of the historical divergence in homeownership rates between different races/ethnicities.”⁶
4. “Delayed marriage, financial challenges of racial and ethnic minorities, less financial security and higher debt all contribute to lower homeownership rates for millennials. Rising home prices and a record low inventory of affordable housing for sale have also impeded homeownership.”⁷
5. “The average millennial homeownership rate was 43 percent in 2019, which was 22 percentage points below the overall national rate.”⁸

On the other hand, for older people, a prime reason for purchasing a home is the desire to be near children and grandchildren.
Desire to be closer to family/friends/relatives (Percentage Distribution of Buyers)⁹

• Ages 58 to 67, 21 percent.
• Ages 68 to 76, 20 percent.
• Ages 77 to 97, 33 percent.

Favorable Tax Structure
People sell houses and buy houses for a variety of reasons, including:

• Employment or educational opportunities.
• Proximity to family or friends.
• Geographic and lifestyle preferences like weather, natural landscape, and population density.
• Cost-of-living and taxes.

The latter is heralded by some social scientists as an increasingly important factor.

“Of the 10 states that experienced the largest gains in income taxpayers (2020-2021 IRS migration data) four do not levy individual income taxes on wage or salary income at all. There is a strong positive relationship between state tax competitiveness and net migration. Overall, states with lower taxes and sound tax structures experienced stronger inbound migration than states with higher taxes and more burdensome tax structures.”¹⁰

Impact of Rising Interest Rates
According to a study conducted by US Bank Wealth Management:¹¹

• The average 30-year mortgage rate in the U.S., which was below three percent in 2021, exceeded seven percent in mid-August 2023 and peaked at 7.79 percent in late October.
• Housing market inventory in 2023 was low. “Cost barriers may be keeping some potential homebuyers from entering the market. At the same time, many existing homeowners are reluctant to sell only to assume more costly mortgages required to purchase new homes.”¹²
• Existing home sales in 2023 were the lowest since 1993.

Point: As an IFP it is important to stay current on the impact of cultural and economic trends on your clients’ housing choices and financial objectives.

A Strong Financial Home
According to the Consumer Financial Protection Bureau,^® (An official website of the United States government), “Financial well-being means having financial security and financial freedom of choice, in the present and in the future. More specifically, having financial well-being is when you:

• Have control over day-to-day, month-to-month finances.
• Have the capacity to absorb a financial shock.
• Are on track to meet your financial goals.
• Have the financial freedom to make the choices that allow you to enjoy life.”¹³

Finances play a role in the way we feel every day. An individual’s or family’s overall well-being is greatly influenced by the impact of poorly-controlled spending, unwise investing, misjudgments in major purchases, irresponsible debt accumulation, and intra-family disagreements over money.

A wise, caring IFP who takes the time to understand the home dynamics can have a lasting impact on individuals and families.

Point: We cannot overemphasize the important opportunity for each IFP to enter into a person’s life, impact the whole family, and make a lasting difference in their entire homelife.

Summary
A dear friend of mine is concerned about the environment. He knows he can have limited impact as a solo player in the theater of humanity, but he does what he can. He regularly walks on the roadsides and picks up litter.

As an IFP, you may have grave concerns about the trends in the National Economy, or World Economy. You may fear the possible disruption that AI poses, the challenges of restoring robust supply chains, or the size of the National Debt. You may not have much ability to impact the larger picture, but you certainly can make a difference one home at a time.

Managing the economy starts at home.

“The strength of a nation derives from the integrity of the home.”—Confucius

The best place to start is to help your clients to review the decisions from their past that led to the current state of financial affairs, and then move on to building attainable, satisfying financial goals and objectives.

“I realized that home is where there are both knowledge of the past and plans for the future.”¹⁴—Bernd Heinrich

Huge numbers of people across the United States need your professional expertise. Make every effort you can to bring the tools, products, approaches, and solutions to meet people right where they face their biggest challenges—in the sphere of their own home.

Footnotes:

1. https://www.merriam-webster.com/dictionary/home.
2. “The Homing Instinct: Meaning and Mystery in Animal Migration,” by Bernd Heinrich, Houghton Mifflin Harcourt; First Edition (April 8, 2014), page 38.
3. https://www.insurancebusinessmag.com/us/news/property/whats-causing-americans-to-drop-home-insurance-coverage-457862.aspx.
4. https://sf.freddiemac.com/docs/pdf/fact-sheet/millennial-playbook_millennials-and-housing.pdf.
5. Ibid.
6. Ibid.
7. Ibid.
8. Ibid.
9. https://www.nar.realtor/sites/default/files/documents/2023-home-buyers-and-sellers-generational-trends-report-03-28-2023.pdf.
10. https://taxfoundation.org/data/all/state/taxes-affect-state-migration-trends-2023/.
11. https://www.usbank.com/investing/financial-perspectives/investing-insights/interest-rates-impact-on-housing-market.html.
12. Ibid.
13. https://www.consumerfinance.gov/consumer-tools/financial-well-being/about.
14. “The Homing Instinct: Meaning and Mystery in Animal Migration,” by Bernd Heinrich, Houghton Mifflin Harcourt; First Edition (April 8, 2014), page 248.