More home buyers are being tempted onto the market by the incredibly low mortgage rates being offered, but they’re becoming increasingly frustrated at the limited choice of homes for sale.
The combination of an unseasonable surge in buyer demand and reduced housing inventories, there simply aren’t enough homes to satisfy everyone who’s looking, CNBC reported.
Indeed,
housing inventories nationwide fell 2.5% in September, compared to
the same month one year ago. But the situation gets even worse when
we consider the most affordable segment of the market. According to
CNBC, inventory of homes priced at $200,000 or less is down 10%
compared to a year ago, while the $200,000 to $750,000 segment saw no
change. Unfortunately, economists believe inventory in that price
range will also fall in the coming months.
“If,
or better yet, when inventory in this segment begins to take a
downturn, the vast majority of home buyers are going to feel its
effects as their options rapidly dwindle,” George Raitu,
realtor.com’s senior economist, told CNBC. “September inventory
trends, especially in the mid-market, may be the canary in the coal
mine that we could be headed for even lower levels of inventory in
early 2020.”
The
most likely result of this growing demand for homes and the shortage
of available options is that home prices will rise, which may
eventually help to reduce demand and balance things out.
But
right now, buyers are being increasingly tempted to have a look due
to the low mortgage rates on offer. According to Freddie Mac, the
30-year fixed-rate mortgage hovered around 3.5% in September, well
below the average of 5% we saw last November. And both new and
existing home sales have increased simultaneously, as rates decline.
Even
worse, it seems builders are unable to make up the shortfall. Robert
Dietz, chief economist of the National Association of Home Builders,
told CNBC that new construction is unlikely to be fast enough to
provide buyers with the options they want at affordable price points.
He said that just 10% of sales of newly built homes are priced at
$200,000 or less, whereas that percentage was at 40% just ten years
ago. He adds that the new home market is undersupplied by around 1
million housing units overall.
“We’ve
faced what has been called a perfect storm of supply-side
challenges,” Dietz said. “There has been an ongoing labor
shortage, we lack the necessary land and lots to build homes, we’ve
had building material cost concerns, and then probably the most
important factor has been higher regulatory costs since the Great
Recession.”
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected]
A bipartisan group of legislators from the U.S. Senate and House of Representatives have introduced a new bill, the Affordable Housing Credit Improvement Act (AHCIA), which could help spur the construction of two million affordable housing units over the next 10 years.
The bill has been introduced in both chambers and seeks to expand the low-income housing tax credit.
If passed, the bill would accomplish these goals through three primary methods: by increasing the number of credits allowed to each state by 50% over the next two years; by increasing the number of affordable housing projects that can be built using private activity bonds; and improving the Housing Credit program to better serve at-risk and underserved communities.
Communities that could qualify as “at-risk” or “underserved” include veterans, domestic violence victims, formerly homeless students, certain Native American communities and rural residents.
The effort is being led by House members Darin LaHood (R-Ill.), Suzan DelBene (D-Wash.), Brad Wenstrup (R-Ohio), Don Beyer (D-Va.), Claudia Tenney (R-N.Y.), and Jimmy Panetta (D-Calif.). In the House, the bill has more than 60 bipartisan co-sponsors. Taking point on the measure in the Senate is Maria Cantwell (D-Wash.), Todd Young (R-Ind.), Ron Wyden (D-Ore.) and Marsha Blackburn (R-Tenn.).
In the House, the bill is designated as H.R. 3238 while the Senate version is S. 1557.
“Affordable housing is vital for families throughout Illinois and the Low-Income Housing Tax Credit continues to be an important tool to drive investment in the affordable rental housing market,” said Rep. LaHood in a statement. “This bipartisan bill will modernize the Low-Income Housing Tax Credit and help expand our housing supply, strengthening communities and supporting economic development in Illinois and across the county.”
Sen. Cantwell — whose state recently took action on its housing priorities through state-level legislation — added that the core priority is to address housing costs.
“This legislation would increase the federal resources allocated to each state, cut the red tape that hinders financing for workforce housing, better serve people most in need, and ultimately add more than 64,000 affordable units to Washington’s housing stock over the next decade,” she said.
According to a brief by the ACTION Campaign, the AHCIA has been introduced in each of the previous four U.S. Congresses and earned bipartisan support each time. Portions of the bill have been enacted over the years, but it has not made it into law in a comprehensive fashion.
Both the Senate and House versions were introduced into their respective chambers on May 11.
I’m a fan of unusual homes. From tiny homes to recycled homes, I’m fascinated by unconventional ways one can build houses that save on construction costs and future utility bills.
Our own house plans are for plastered walls with straw bale infill, and we’re close to breaking ground. But when I picked up the latest issue of granola crunchy Mother Earth News, for a minute I considered scrapping our plans. To live in a grain bin.
You really have to click that last link and check out the photos to see how architects and builders are taking the big round structures pictured above and turning them into stunning homes. I had never heard of such a thing as a grain bin house, but I was intrigued.
Low Cost, Low Impact
You might be wondering, as any rational person would, what would possibly drive someone to turn a grain silo into a house. Turns out there are quite a few reasons grain bin inhabitants chose the structure. Consider the following features:
Eco-friendly. Many builders buy used bins, and they can be recycled. Mother Earth News suggests finding used bins by placing an ad in farm magazines or on your local farm co-op bulletin board, through a local bin dealer or erector, or surprisingly, even on Craigslist and eBay.
Low maintenance. Not fond of painting your house? That’s no longer a task on the to-do list with a grain bin house. The shiny metal will dull to gray, but you’ll never have to pick up a paintbrush.
Cost effective. Bins cost $30 per square foot or less (not including slab or assembly costs). You can get smaller bins for an office or workshop for a few hundred dollars, or sometimes for free.
Visual appeal. Mother Earth News interviewed Mark Clipsham, an architect from Iowa, who says, “…curved forms are used in either the most expensive and prestigious buildings or the most utilitarian and primitive ones. These forms have evolved out of use because of changes in available materials, labor costs and prevailing building methods. But why not use something utilitarian and affordable — a grain bin — to build what is otherwise in the realm of the expensive and exclusive?”
Bells and Whistles
Earl Stein’s 1,800-square foot grain bin home in Woodland, Utah, uses high-tech systems and solar heat gain to use less energy. The house, called Monte-Silo, was designed by Gigaplex Architects out of two linked corrugated metal grain silos, arranged to enjoy a view of the Provo River. The home features the following:
Rubber-covered concrete floors heated by sunlight that pours through the windows
Radiant heat in the floors (Stein says even with the indulgence, his heating bills are far below the average for houses of the same size in Utah.)
Heat retained with computer-controlled drapes
Propane-burning stove
Metal grating and guard rail of the second level deck provide shade in the great room during the summer
Another beautiful example of a high-end grain silo home is M. J. Gladstone’s 450-square-foot, octagonal living room and bedroom combo with and attached angular shed that holds the kitchen, dining area, home office, bathroom, and a closet. Both Gladstone’s and Stein’s homes cost about $200 per square foot.
A Simple, Owner-Built Home
On the other end of the spectrum is an owner-built grain bin home constructed with mostly locally sourced materials. A 3,000-bushel grain bin was converted into two one-room apartments with plenty of cost-saving features, such as the following:
Used grain bin with walls, a roof, and a concrete floor
Straw bale insulation
Double-paned glass windows and doors placed to maximize solar heat gain
Doors, windows, and straw bales purchased locally
Reclaimed wood from a nearby barn
24-watt solar electric system
The owners chose a grain silo home because it could be inhabitable in about three months (before winter). In fact, the speed of assembly makes these structures ideal for emergency situations in areas hit by natural disaster. Final cost wasn’t listed for this home, but it’s fair to say it’s at the low end of costs for a grain bin home.
Grain bins aren’t just being converted into homes, either. People have made offices, workshops, playhouses, storage buildings, and guest apartments out of them. Considering expense, strength, and maintenance, they’re an ideal building material. Unusual? Most definitely. But when you start to think outside the box, they make a lot of sense, too.
What do you think about unconventional homes like these? Would you ever live in one? What about building a workshop or office out of a grain bin?
There was a viral tweet going around from YouTube housing influencer Nick Gerli. You’ve probably seen it. Gerli cites data from a company called AllTheRooms to make the case that the Airbnb/short-term rental market is “crashing” and it will have a big impact on inventory.
Indeed, the chart he shared is alarming.
A nearly 50% drop in revenue in some markets!
But the data looks dubious. I interviewed Jamie Lane, the chief economist and head of analytics at AirDNA. He looked at the AllTheRooms data and ran a mirror analysis with AirDNA’s data and, well, just look.
Revenue per listing is down, but it’s not down by a third or more in those markets, according to AirDNA.
AllTheRooms didn’t respond to my requests for comment, but Gerli, who runs Reventure Consulting, said he was aware of the discrepancies in the data and had reached out to Airbnb “to provide their own data for these cities so we can get the most accurate figures.” (Airbnb itself said in a statement that the data was “not consistent with its own” and added that “more guests are traveling on Airbnb than ever before.”)
Gerli, however, did offer high level thoughts on the situation. His outlook remains bearish.
“Both data sources agree that the Airbnb supply in America has surged over the last 2-3 years since the pandemic started, particularly in cities like Phoenix. In some markets there are now 2-3x more homes listed on Airbnb than for sale, a situation that has robbed the housing market for inventory,” Gerli wrote in an email. “However, now that the Airbnb correction has started, we will likely see struggling Airbnb owners look to sell their properties. Look for the downturn to be worse in cities where 1) the revenues declined the most and 2) there’s the highest surplus of Airbnb inventory relative to homes for sale.”
Lane at AirDNA doesn’t see a ‘crash’ happening, even though revenue is trending down from last year and it is a relatively saturated marketplace in some metros (the number of listings was up 18% over the same period last year).
“I see that as an entirely false narrative,” he said. “The short-term rental industry has very healthy performance right now. If you look at overall occupancies for 2023, the industry is going to run 57%. That compares to a pre-COVID [level] of 55%. So we’re well above pre COVID occupancy levels. We are down from the 2021 highs, but that was a COVID anomaly in terms of industry performance.”
AirDNA expects modest Airbnb revenue declines throughout the rest of the year – a 1% drop for the rest of the year and no growth in 2024.
Let’s dive in a little further. Lane maintains that the fundamentals in STR remain strong – we see lower churn today than we saw pre-pandemic, the travel desire is absolutely real, a large segment of the population is more mobile than ever (thanks, remote work!), and about 20% of listings are private or shared rooms, not entire houses.
More importantly, revenue for most hosts across the country is still strong nationally, reducing the likelihood of forced sellers, Lane said.
“If you look at revenue today, average revenue per listing compared to pre-pandemic, we are 30% higher, and that has barely come down off the highs in 2022. The earnings of short term rental operators have not collapsed by any means.”
But let’s say demand nosedives due to a recession and the numbers no longer pencil out for some operators. What impact would that have on the market?
It’s hard to say, but an STR crash like the one Gerli describes already did happen, back in 2020.
“In 2020, listings fell by 25%, we saw many markets essentially decline by half, with no disruption to the broader housing market,” Lane said.
Inventory, as ever, is key to all this. Currently, there are about 1.4 million short-term rental listings in the U.S. While there are about 600,000 active for-sale listings. Even if all the 1.4 million STR listings hit the market at the same time, I don’t think that would crash the market.
“Active listings in a normal period would be between 2 to 2.5 million,” said HousingWire’s Lead Analyst Logan Mohtashami. “Even if all those homes came to market overnight, they would need to not get a bid over 60 days to allow the active inventory to return to historical norms.”
Added Lane: “When you look at major cities, let’s say the 50 largest metros, most of that [Airbnb] inventory is not available full time. Over 50% was available for rent less than 180 days over the previous year. So it’s not full time short term rental investments.”
Lane argued that a flood of Airbnb’s wouldn’t crash heavily saturated markets either.
“So you look at a market like Phoenix and how many new homes are being built any given year, that’s larger than the entire short term rental industry,” Lane said.
The broader housing market needs more inventory any which way it can get it, but I don’t see much coming from non-viable Airbnbs. What do you think? Share your thoughts with me at [email protected].
In our weekly DataDigest newsletter, HW Media Managing Editor James Kleimann breaks down the biggest stories in housing through a data lens. Sign up here! Have a subject in mind? Email him at [email protected]
There was a viral tweet going around from YouTube housing influencer Nick Gerli. You’ve probably seen it. Gerli cites data from a company called AllTheRooms to make the case that the Airbnb/short-term rental market is “crashing” and it will have a big impact on inventory.
Indeed, the chart he shared is alarming.
A nearly 50% drop in revenue in some markets!
But the data looks dubious. I interviewed Jamie Lane, the chief economist and head of analytics at AirDNA. He looked at the AllTheRooms data and ran a mirror analysis with AirDNA’s data and, well, just look.
Revenue per listing is down, but it’s not down by a third or more in those markets, according to AirDNA.
AllTheRooms didn’t respond to my requests for comment, but Gerli, who runs Reventure Consulting, said he was aware of the discrepancies in the data and had reached out to Airbnb “to provide their own data for these cities so we can get the most accurate figures.” (Airbnb itself said in a statement that the data was “not consistent with its own” and added that “more guests are traveling on Airbnb than ever before.”)
Gerli, however, did offer high level thoughts on the situation. His outlook remains bearish.
“Both data sources agree that the Airbnb supply in America has surged over the last 2-3 years since the pandemic started, particularly in cities like Phoenix. In some markets there are now 2-3x more homes listed on Airbnb than for sale, a situation that has robbed the housing market for inventory,” Gerli wrote in an email. “However, now that the Airbnb correction has started, we will likely see struggling Airbnb owners look to sell their properties. Look for the downturn to be worse in cities where 1) the revenues declined the most and 2) there’s the highest surplus of Airbnb inventory relative to homes for sale.”
Lane at AirDNA doesn’t see a ‘crash’ happening, even though revenue is trending down from last year and it is a relatively saturated marketplace in some metros (the number of listings was up 18% over the same period last year).
“I see that as an entirely false narrative,” he said. “The short-term rental industry has very healthy performance right now. If you look at overall occupancies for 2023, the industry is going to run 57%. That compares to a pre-COVID [level] of 55%. So we’re well above pre COVID occupancy levels. We are down from the 2021 highs, but that was a COVID anomaly in terms of industry performance.”
AirDNA expects modest Airbnb revenue declines throughout the rest of the year – a 1% drop for the rest of the year and no growth in 2024.
Let’s dive in a little further. Lane maintains that the fundamentals in STR remain strong – we see lower churn today than we saw pre-pandemic, the travel desire is absolutely real, a large segment of the population is more mobile than ever (thanks, remote work!), and about 20% of listings are private or shared rooms, not entire houses.
More importantly, revenue for most hosts across the country is still strong nationally, reducing the likelihood of forced sellers, Lane said.
“If you look at revenue today, average revenue per listing compared to pre-pandemic, we are 30% higher, and that has barely come down off the highs in 2022. The earnings of short term rental operators have not collapsed by any means.”
But let’s say demand nosedives due to a recession and the numbers no longer pencil out for some operators. What impact would that have on the market?
It’s hard to say, but an STR crash like the one Gerli describes already did happen, back in 2020.
“In 2020, listings fell by 25%, we saw many markets essentially decline by half, with no disruption to the broader housing market,” Lane said.
Inventory, as ever, is key to all this. Currently, there are about 1.4 million short-term rental listings in the U.S. While there are about 600,000 active for-sale listings. Even if all the 1.4 million STR listings hit the market at the same time, I don’t think that would crash the market.
“Active listings in a normal period would be between 2 to 2.5 million,” said HousingWire’s Lead Analyst Logan Mohtashami. “Even if all those homes came to market overnight, they would need to not get a bid over 60 days to allow the active inventory to return to historical norms.”
Added Lane: “When you look at major cities, let’s say the 50 largest metros, most of that [Airbnb] inventory is not available full time. Over 50% was available for rent less than 180 days over the previous year. So it’s not full time short term rental investments.”
Lane argued that a flood of Airbnb’s wouldn’t crash heavily saturated markets either.
“So you look at a market like Phoenix and how many new homes are being built any given year, that’s larger than the entire short term rental industry,” Lane said.
The broader housing market needs more inventory any which way it can get it, but I don’t see much coming from non-viable Airbnbs. What do you think? Share your thoughts with me at [email protected].
In our weekly DataDigest newsletter, HW Media Managing Editor James Kleimann breaks down the biggest stories in housing through a data lens. Sign up here! Have a subject in mind? Email him at [email protected]
High above the Las Vegas Strip, solar panels blanketed the roof of Mandalay Bay Convention Center — 26,000 of them, rippling across an area larger than 20 football fields.
From this vantage point, the sun-dappled Mandalay Bay and Delano hotels dominated the horizon, emerging like comically large golden scepters from the glittering black panels.Snow-tipped mountains rose to the west.
It was a cold winter morning in the Mojave Desert. But there was plenty of sunlight to supply the solar array.
“This is really an ideal location,” said Michael Gulich, vice president of sustainability at MGM Resorts International.
The same goes for the rest of Las Vegas and its sprawling suburbs.
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Sin City already has more solar panels per person than any major U.S. metropolis outside Hawaii, according to one analysis. And the city is bursting with single-family homes, warehouses and parking lots untouched by solar.
L.A. Times energy reporter Sammy Roth heads to the Las Vegas Valley, where giant solar fields are beginning to carpet the desert. But what is the environmental cost? (Video by Jessica Q. Chen, Maggie Beidelman / Los Angeles Times)
There’s enormous opportunity to lower household utility bills and cut climate pollution — without damaging wildlife habitat or disrupting treasured landscapes.
But that hasn’t stopped corporations from making plans to carpet the desert surrounding Las Vegas with dozens of giant solar fields — some of them designed to supply power to California. The Biden administration has fueled that growth, taking steps to encourage solar and wind energy development across vast stretches of public lands in Nevada and other Western states.
Those energy generators could imperil rare plants and slow-footed tortoises already threatened by rising temperatures.
They could also lessen the death and suffering from the worsening heat waves, fires, droughts and storms of the climate crisis.
Researchers have found there’s not nearly enough space on rooftops to supply all U.S. electricity — especially as more people drive electric cars. Even an analysis funded by rooftop solar advocates and installers found that the most cost-effective route to phasing out fossil fuels involves six times more power from big solar and wind farms than from smaller local solar systems.
But the exact balance has yet to be determined. And Nevada is ground zero for figuring it out.
The outcome could be determined, in part, by billionaire investor Warren Buffett.
The so-called Oracle of Omaha owns NV Energy, the monopoly utility that supplies electricity to most Nevadans. NV Energy and its investor-owned utility brethren across the country can earn huge amounts of money paving over public lands with solar and wind farms and building long-distance transmission lines to cities.
But by regulatory design, those companies don’t profit off rooftop solar. And in many cases, they’ve fought to limit rooftop solar — which can reduce the need for large-scale infrastructure and result in lower returns for investors.
Mike Troncoso remembers the exact date of Nevada’s rooftop solar reckoning.
It was Dec. 23, 2015, and he was working for SolarCity. The rooftop installer abruptly ceased operations in the Silver State after NV Energy helped persuade officials to slash a program that pays solar customers for energy they send to the power grid.
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“I was out in the field working, and we got a call: ‘Stop everything you’re doing, don’t finish the project, come to the warehouse,’” Troncoso said. “It was right before Christmas, and they said, ‘Hey, guys, unfortunately we’re getting shut down.’”
After a public outcry, Nevada lawmakers partly reversed the reductions to rooftop solar incentives. Since then, NV Energy and the rooftop solar industry have maintained an uneasy political ceasefire. Installations now exceed pre-2015 levels.
Today, Troncoso is Nevada branch manager for Sunrun, the nation’s largest rooftop solar installer. The company has enough work in the state to support a dozen crews, each named for a different casino. On a chilly winter morning before sunrise, they prepared for the day ahead — laying out steel rails, hooking up microinverters and loading panels onto powder-blue trucks.
But even if Sunrun’s business continues to grow, it won’t eliminate the need for large solar farms in the desert.
Some habitat destruction is unavoidable — at least if we want to break our fossil fuel addiction. The key questions are: How many big solar farms are needed, and where should they be built? Can they be engineered to coexist with animals and plants?
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And if not, should Americans be willing to sacrifice a few endangered species in the name of tackling climate change?
To answer those questions, Los Angeles Times journalists spent a week in southern Nevada, touring solar construction sites, hiking up sand dunes and off-roading through the Mojave. We spoke with NV Energy executives, conservation activists battling Buffett’s company and desert rats who don’t want to see their favorite off-highway vehicle trails cut off by solar farms.
Odds are, no one will get everything they want.
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The tortoise in the coal mine
Biologist Bre Moyle easily spotted the small yellow flag affixed to a scraggly creosote bush — one of many hardy plants sprouting from the caliche soil, surrounded by rows of gleaming steel trusses that would soon hoist solar panels toward the sky.
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Moyle leaned down for a closer look, gently pulling aside branches to reveal a football-sized hole in the ground. It was the entrance to a desert tortoise burrow — one of thousands catalogued by her employer, Primergy Solar, during construction of one of the nation’s largest solar farms on public lands outside Las Vegas.
“I wouldn’t stand on this side of it,” Moyle advised us. “If you walk back there, you could collapse it, potentially.”
I’d seen plenty of solar construction sites in my decade reporting on energy. But none like this.
Instead of tearing out every cactus and other plant and leveling the land flat — the “blade and grade” method — Primergy had left much of the native vegetation in place and installed trusses of different heights to match the ground’s natural contours. The company had temporarily relocated more than 1,600 plants to an on-site nursery, with plans to put them back later.
The Oakland-based developer also went to great lengths to safeguard desert tortoises — an iconic reptile protected under the federal Endangered Species Act, and the biggest environmental roadblock to building solar in the Mojave.
Desert tortoises are sensitive to global warming, residential sprawl and other human encroachment on their habitat. The U.S. Fish and Wildlife Service has estimated tortoise populations fell by more than one-third between 2004 and 2014.
Scientists consider much of the Primergy site high-quality tortoise habitat. It also straddles a connectivity corridor that could help the reptiles seek safer haven as hotter weather and more extreme droughts make their current homes increasingly unlivable.
Before Primergy started building, the company scoured the site and removed 167 tortoises, with plans to let them return and live among the solar panels once the heavy lifting is over. Two-thirds of the project site will be repopulated with tortoises.
Workers removed more tortoises during construction. As of January, the company knew of just two tortoises killed — one that may have been hit by a car, and another that may have been entombed in its burrow by roadwork, then eaten by a kit fox.
Primergy Vice President Thomas Regenhard acknowledged the company can’t build solar here without doing any harm to the ecosystem — or spurring opposition from conservation activists. But as he watched union construction workers lift panels onto trusses, he said Primergy is “making the best of the worst-case situation” for solar opponents.
“What we’re trying to do is make it the least impactful on the environment and natural resources,” he said. “What we’re also doing is we’re sharing that knowledge, so that these projects can be built in a better way moving forward.”
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The company isn’t saving tortoises out of the goodness of its profit-seeking heart.
The U.S. Bureau of Land Management conditioned its approval of the solar farm, called Gemini, on a long list of environmental protection measures — and only after some bureau staffers seemingly contemplated rejecting the project entirely.
Documents obtained under the Freedom of Information Act by the conservation group Defenders of Wildlife show the bureau’s Las Vegas field office drafted several versions of a “record of decision” that would have denied the permit application for Gemini. The drafts listed several objections, including harm to desert tortoises, loss of space for off-road vehicle drivers and disturbance of the Old Spanish National Historic Trail, which runs through the project site.
Separately, Primergy reached a legal settlement with conservationists — who challenged the project’s federal approval in court — in which the company agreed to additional steps to protect tortoises and a plant known as the three-corner milkvetch.
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The company estimates just 2.5% of the project site will be permanently disturbed — far less than the 33% allowed by Primergy’s federal permit. Regenhard is hopeful the lessons learned here will inform future solar development on public lands.
“This is something new. So we’re refining a lot of the processes,” he said. “We’re not perfect. We’re still learning.”
By the time construction wraps this fall, 1.8 million panels will cover nearly 4,000 football fields’ worth of land, just off the 15 Freeway. They’ll be able to produce 690 megawatts of power — as much as 115,000 typical home solar systems. And they’ll be paired with batteries, to store energy and help NV Energy customers keep running their air conditioners after sundown.
Unlike many solar fields, Gemini is close to the population it will serve — just a few dozen miles from the Strip. And the affected landscape is far from visually stunning, with none of the red-rock majesty found at nearby Valley of Fire State Park.
But desert tortoises don’t care if a place looks cool to humans. They care if it’s good tortoise habitat.
Moyle, Primergy’s environmental services manager, pointed to a small black structure at the bottom of a fence along the site’s edge — a shade shelter for tortoises. Workers installed them every 800 feet, so that if any relocated reptiles try to return to the solar farm too early, they don’t die pacing along the fence in the heat.
“They have a really, really good sense of direction,” Moyle said. “They know where their homes are. They want to come back.”
Primergy will study what happens when tortoises do come back. Will they benefit from the shade of the solar panels? Or will they struggle to survive on the industrialized landscape?
And looming over those uncertainties, a more existential query: With global warming beginning to devastate human and animal life around the world, should we really be slowing or stopping solar development to save a single type of reptile?
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Moyle was ready with an answer: Tortoises are a keystone species. If they’re doing well, it’s a good sign of a healthy ecosystem in which other desert creatures — such as burrowing owls, kit foxes and American badgers — are positioned to thrive, too.
And as the COVID-19 pandemic has demonstrated, human survival is inextricably linked with a healthy natural world.
“We take one thing out, we don’t know what sort of disastrous effect it’s going to have on everything else,” Moyle said.
We do, however, know the consequences of relying on fossil fuels: entire towns burning to the ground, Lake Mead three-quarters empty, elderly Americans baking to death in their overheated homes. With worse to come.
The shifting sands of time
A few miles south, another solar project was rising in the desert. This one looked different.
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A fleet of bulldozers, scrapers, excavators and graders was nearly done flattening the land — a beige moonscape devoid of cacti and creosote. The solar panel support trusses were all the same height, forming an eerily rigid silver sea.
When I asked Carl Glass — construction manager for DEPCOM Power, the contractor building this project for Buffett’s NV Energy — why workers couldn’t leave vegetation in place like at Gemini, he offered a simple answer: drainage. Allowing the land to retain its natural contours, he said, would make it difficult to move stormwater off the site during summer monsoons.
Safety was another consideration, said Dani Strain, NV Energy’s senior manager for the project. Blading and grading the land meant workers wouldn’t have to carry solar panels and equipment across ground studded with tripping hazards.
“It’s nicer for the environment not to do it,” Strain said. “But it creates other problems. You can’t have everything.”
This kind of solar project has typified development in the Mojave Desert.
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And it helps explain why the Center for Biological Diversity’s Patrick Donnelly has fought so hard to limit that development.
The morning after touring the solar construction sites, we joined Donnelly for a hike up Big Dune, a giant pile of sand covering five square miles and towering 500 feet above the desert floor, 90 miles northwest of Las Vegas. The sun was just beginning its ascent over the Mojave, bathing the sand in a smooth umber glow beneath pockets of wispy cloud.
On weekends, Donnelly said, the dune can be overrun by thousands of off-road vehicles. But on this day, it was quiet.
Energy companies have proposed more than a dozen solar farms on public lands surrounding Big Dune — some with overlapping footprints. Donnelly doesn’t oppose all of them. But he thinks federal agencies should limit solar to the least ecologically sensitive parts of Nevada, instead of letting companies pitch projects almost anywhere they choose.
“Developers are looking at this as low-hanging fruit,” he said. “The idea is, this is where California can build all of its solar.”
We trekked slowly up the dune, our bodies casting long shadows in the early morning light. When we took a breather and looked back down, a trail of footprints marked our path. Donnelly assured us a windy day would wipe them away.
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“This is why I live here, man,” he said. “It’s the most beautiful place on Earth, in my mind.”
Donnelly broke his back in a rock-climbing accident, so he used a walking stick to scale the dune. He lives not far from here, at the edge of Death Valley National Park, and works as the nonprofit Center for Biological Diversity’s Great Basin director.
As we resumed our journey, the wind blowing hard, I asked Donnelly to rank the top human threats to the Mojave. He was quick to answer: The climate crisis was No. 1, followed by housing sprawl, solar development and off-road vehicles.
“There’s no good solar project in the desert. But there’s less bad,” he said. “And we’re at a point now where we have to settle for less bad, because the alternatives are more bad: more coal, more gas, climate apocalypse.”
That hasn’t stopped Donnelly and his colleagues from fighting renewable energy projects they fear would wipe out entire species — even little-known plants and animals with tiny ranges, such as Tiehm’s buckwheat and the Dixie Valley toad.
“I’m not a religious guy,” Donnelly said. “But all God’s creatures great and small.”
After a steep stretch of sand, we stopped along a ridge with sweeping views. To our west were the Funeral Mountains, across the California state line in Death Valley National Park — and far beyond them Mt. Whitney, its snow-covered facade just barely visible. To our east was Highway 95, cutting across the Amargosa Valley en route from Las Vegas to Reno.
It’s along this highway that so many developers want to build.
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“We would be in a sea of solar right now,” Donnelly said.
Having heard plenty of rural residents say they don’t want to look at such a sea, I asked Donnelly if this was a bad spot for solar because it would ruin the glorious views. He told me he never makes that argument, “because honestly, views aren’t really the primary concern at this moment. The primary concern is stopping the biodiversity crisis and the climate crisis.”
“There are certain places where we shouldn’t put solar because it’s a wild and undisturbed landscape,” he said.
As far as he’s concerned, though, the Amargosa Valley isn’t one of those landscapes, what with Highway 95 running through it. The same goes for Dry Lake Valley, where NV Energy’s solar construction site is already surrounded by energy infrastructure.
What Donnelly would like to see is better planning.
He pointed to California, where state and federal officials spent eight years crafting a desert conservation plan that allows solar and wind farms across a few hundred thousand acres while setting aside millions more for protection. He thinks a similar process is crucial in Nevada, where four-fifths of the land area is owned by the federal government — more than any other state.
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If Donnelly had his way, regulators would put the kibosh on solar farms immediately adjacent to Big Dune. He’s worried they could alter the movement of sand across the desert floor, affecting several rare beetles that call the dune home.
But if the feds want to allow solar projects along the highway to the south, near the Area 51 Alien Center?
“Might not be the end the world,” Donnelly said.
He shot me a grin.
“You know, one thing I like to do …”
Without warning, he took off racing down the dune, carried by momentum and love for the desert. He laughed as he reached a natural stopping point, calling for us to join him. His voice sounded free and full of possibility.
Some solar panels on the horizon wouldn’t have changed that.
Shout it from the rooftops
Laura Cunningham and Kevin Emmerich were a match made in Mojave Desert heaven.
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Cunningham was a wildlife biologist, Emmerich a park ranger when they met nearly 30 years ago at Death Valley. She studied tortoises for government agencies and later a private contractor. He worked with bighorn sheep and gave interpretive talks. They got married, bought property along the Amargosa River and started their own conservation group, Basin and Range Watch.
And they’ve been fighting solar development ever since.
That’s how we ended up in the back of their SUV, pulling open a rickety cattle gate off Highway 95 and driving past wild burros on a dirt road through Nevada’s Bullfrog Hills, 100 miles northwest of Las Vegas.
They had told us Sarcobatus Flat was stunning, but I was still surprised by how stunning. I got my first look as we crested a ridge. The gently sloping valley spilled down toward Death Valley National Park, whose snowy mountain peaks towered over a landscape dotted with thousands of Joshua trees.
“Everything we’re looking at is proposed for solar development,” Cunningham said.
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Most environmentalists agree we need at least some large solar farms. Cunningham and Emmerich are different. They’re at the vanguard of a harder-core desert protection movement that sees all large-scale solar farms on public lands as bad news.
Why had so many companies converged on Sarcobatus Flat?
The main answer is transmission. NV Energy is seeking federal approval to build the 358-mile Greenlink West electric line, which would carry thousands of megawatts of renewable power between Reno and Las Vegas along the Highway 95 corridor.
The dirt road curved around a small hill, and suddenly we found ourselves on the valley floor, surrounded by Joshua trees. Some looked healthy; others had bark that had been chewed by rodents seeking water, a sign of drought stress. Scientists estimate the Joshua tree’s western subspecies could lose 90% of its range as the world gets hotter and droughts get more intense.
But asked whether climate change or solar posed a bigger threat to Sarcobatus Flat, Cunningham didn’t hesitate.
“Oh, solar development hands down,” she said.
Nearly 20 years ago, she said, she helped relocate desert tortoises to make way for a test track in California. One of them tried to return home, walking 20 miles before hitting a fence. It paced back and forth and eventually died of heat exhaustion.
Solar farms, she said, pose a similar threat to tortoises. And at Sarcobatus Flat, they would cover a high-elevation area that could otherwise serve as a climate refuge for Joshua trees, giving them a relatively cool place to reproduce as the planet heats up.
“It makes no sense to me that we’re going to bulldoze them down and throw them into trash piles. It’s just crazy,” she said.
In Cunningham and Emmerich’s view, every sun-baked parking lot in L.A. and Vegas and Phoenix should have a solar canopy, every warehouse and single-family home a solar roof. It’s a common argument among desert defenders: Why sacrifice sensitive ecosystems when there’s an easy alternative for fighting climate change? Especially when rooftop solar can reduce strain on an overtaxed electric grid and — when paired with batteries — help people keep their lights on during blackouts?
The answer isn’t especially satisfying to conservationists.
For all the virtues of rooftop solar, it’s an expensive way to generate clean power — and keeping energy costs low is crucial to ensure that lower-income families can afford electric cars, another key climate solution. A recent report from investment bank Lazard pegged the cost of rooftop solar at 11.7 cents per kilowatt-hour on the low end, compared with 2.4 cents for utility solar.
Even when factoring in pricey long-distance electric lines, utility-scale solar is typically cheaper, several experts told me.
“It’s three to six times more expensive to put solar on your roof than to put it in a large-scale project,” said Jesse Jenkins, an energy systems researcher at Princeton University. “There may be some added value to having solar in the Los Angeles Basin instead of the middle of the Mojave Desert. But is it 300% to 600% more value? Probably not. It’s probably not even close.”
There’s a practical challenge, too.
The National Renewable Energy Laboratory has estimated U.S. rooftops could generate 1,432 terawatt-hours of electricity per year — just 13% of the power America will need to replace most of its coal, oil and gas, according to research led by Jenkins.
Add in parking lots and other areas within cities, and urban solar systems might conceivably supply one-quarter or even one-third of U.S. power, several experts told The Times — in an unlikely scenario where they’re installed in every suitable spot.
Energy researcher Chris Clack’s consulting firm has found that dramatic growth in rooftop and other small-scale solar installations could reduce the costs of slashing climate pollution by half a trillion dollars. But even Clack said rooftops alone won’t cut it.
“Realistically, 80% is going to end up being utility grid no matter what,” he said.
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All those industrial renewable energy projects will have to go somewhere.
Sarcobatus Flat may not be the answer. Federal officials classified all three solar proposals there as “low priority,” citing their proximity to Death Valley and potential harm to tortoise habitat. One developer withdrew its application last year.
Before leaving the area, Cunningham pointed to a wooden marker, one of at least half a dozen stretching out in a line. I walked over to take a closer look and discovered it was a mining claim for lithium — a main ingredient in electric-car batteries.
If solar development didn’t upend this valley, lithium extraction might.
On the beaten track
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The four-wheeler jerked violently as Erica Muxlow pressed her foot to the gas, sending us flying down a rough dirt road with no end in sight but the distant mountains. Five-point safety straps were the only things stopping us from flying out of our seats, the vehicle leaping through the air as we reached speeds of 40 mph, then 50 mph, the wind whipping our faces.
It was like riding Disneyland’s Matterhorn Bobsleds — just without the Yeti.
Ahead of us, Muxlow’s neighbor Jimmy Lewis led the way on an electric blue motorcycle, kicking up a stream of sand. He wanted us to see thousands of acres of public lands outside his adopted hometown of Pahrump, in Nevada’s Nye County, that could soon be blocked by solar projects — cutting off access to off-highway vehicle enthusiasts such as himself.
“You could build an apartment complex or a shopping mall here, and it would be the same thing to me,” he said.
To progressive-minded Angelenos or San Franciscans, preserving large chunks of public land for gas-guzzling, environmentally destructive dirt bikes might sound like a terrible reason not to build solar farms that would lessen the climate crisis.
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But here’s the reality: Rural Westerners such as Lewis will play a key role in determining how much clean energy gets built.
Not long before our Nevada trip, Nye County placed a six-month pause on new renewable energy projects, citing local concerns about loss of off-road vehicle trails. Similar fears have stymied development across the U.S., with rural residents attacking solar and wind farms as industrial intrusions on their way of life — and local governments throwing up roadblocks.
For Lewis, the conflict is deeply personal.
He moved here from Southern California more than a decade ago, trading life by the beach for a five-acre plot where he runs an off-roading school and test-drives motorcycles for manufacturers. His warehouse was packed with dozens of dirt bikes.
“This is my life. Motorcycles, motorcycles, motorcycles,” he said, laughing.
Lewis has worked to stir up opposition to three local solar farm proposals. So far, his efforts have been in vain.
One project is already under construction. Peering through a fence, we saw row after row of trusses, waiting for their photovoltaic panels. It’s called Yellow Pine, and it’s being built by Florida-based NextEra Energy to supply power to California.
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Lewis learned about Yellow Pine when he was riding one of his favorite trails and was surprised to find it cut off. He compared the experience to riding the best roller-coaster at a theme park, only to have it grind to a halt three-quarters of the way through.
“I don’t want my playground taken away from me,” he said.
“Me neither!” a voice called out from behind us.
We turned and were greeted by Shannon Salter, an activist who had previously spent nine months camping near the Yellow Pine site to protest the habitat destruction. She and Lewis had never met, but they quickly realized they had common cause.
“It’s the opposite of green!” Salter said.
“On my roof, not my backyard,” Lewis agreed.
Never mind that conservationists have long decried the ecological damage from desert off-roading. Salter and Lewis both cared about these lands. Neither wanted to see the solar industry lay claim to them. They talked about staying in touch.
It’s easy to imagine similar alliances forming across the West, the clean energy transition bringing together environmentalists and rural residents in a battle to defend their lifestyles, their landscapes and animals that can’t fight for themselves.
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It’s also easy to imagine major cities that badly need lots of solar and wind power — Los Angeles, Las Vegas, Phoenix — brushing off those complaints as insignificant compared with the climate emergency, or as fueled by right-wing misinformation.
But many of concerns raised by critics are legitimate. And their voices are only getting louder.
As night fell over the Mojave, Lewis shared his idea that any city buying electricity from a desert solar farm should be required to install a certain amount of rooftop solar back home first — on government buildings, at least. It only seemed fair.
“Some people see the desert as just a wasteland,” Lewis said. “I think it’s beautiful.”
The view from Black Mountain
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So how do we build enough renewable energy to replace fossil fuels without destroying too many ecosystems, or stoking too much political opposition from rural towns, or moving too slowly to save the planet?
Few people could do more to ease those tensions than Buffett.
Our conversation kept returning to the legendary investor as we hiked Black Mountain, just outside Vegas, on our last morning in the Silver State. We were joined by Jaina Moan, director of external affairs for the Nature Conservancy’s Nevada chapter. She had promised a view of massive solar fields from the peak — but only after a 3.5-mile trek with 2,000 feet of elevation gain.
“It’ll be a little StairMaster at the end,” she warned us.
The homes and hotels and casinos of the Las Vegas Valley retreated behind us as we climbed, looking ever smaller and more insignificant against the vast open desert. It was an illusion that will prove increasingly difficult to maintain as Sin City and its suburbs continue their march into the Mojave. Nevada politicians from both parties are pushing for legislation that would let federal officials auction off additional public lands for residential and commercial development.
Vegas and other Western cities could limit the need for more suburbs — and sprawling solar farms — by growing smarter, Moan said. Urban areas could embrace density, to help people drive fewer miles and reduce the demand for new power supplies to fuel electric vehicles. They could invest in electric buses and trains — and use less water, which would save a lot of energy.
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“As our spaces become more crowded, we’re going to have to come up with more creative ideas,” Moan said.
That’s where Buffett could make things easier.
The billionaire’s Berkshire Hathaway company owns electric utilities that serve millions of people, from California to Nevada to Illinois. Those utilities, Moan said, could buck the industry trend of urging policymakers to reduce financial incentives for rooftop solar and instead encourage the technology — along with other small-scale clean energy solutions, such as local microgrids.
That would limit the need for big solar farms — at least somewhat.
Berkshire and other energy giants could also build solar on lands already altered by humans, such as abandoned mines, toxic Superfund sites, reservoirs, landfills, agricultural areas, highway corridors and canals that carry water to farms and cities.
The costs are typically higher than building on undisturbed public lands. And in many cases there are technical challenges yet to be resolved. But those kinds of “creative solutions” could at least lessen the loss of biodiversity, Moan said.
“There’s money to be made there, and there’s good to be done,” she said.
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It’s hard to know what Buffett thinks. A Berkshire spokesperson declined my request to interview him.
Tony Sanchez, NV Energy’s executive vice president for business development and external relations, was more forthcoming.
“The problem for us with rooftop solar,” he said, is that it’s “not controlled at all by us.” As a result, NV Energy can’t decide when and how rooftop solar power is used — and can’t rely on that power to help balance supply and demand on the grid.
Over time, Sanchez predicted, a lot more rooftop solar will get built. But he couldn’t say how much.
Rooftop solar faces a similarly uncertain future in California, where state officials voted last year to slash incentive payments, calling them an unfair subsidy. Industry leaders have warned of a dramatic decline in installations.
As we neared the top of Black Mountain, the solar farms on the other side came into view. They stretched across the Eldorado Valley far below — black rectangles that could help save life on Earth while also destroying bits and pieces of it.
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Moan believes the key to balancing clean energy and conservation is “go slow to go fast.” Government agencies, she said, should work with conservation activists, small-town residents and Native American tribes to study and map out the best places for clean energy, then reward companies that agree to build in those areas with faster approvals. Solar and wind development would slow down in the short term but speed up in the long run, with quicker environmental reviews and less risk of lawsuits.
It’s a tantalizing concept — but I confessed to Moan that I worried it would backfire.
What if the sparring factions couldn’t agree on the best spots to build solar and wind farms, and instead wasted years arguing? Or what if they did manage to hammer out some compromises, only for a handful of unhappy people or groups to take them to court, gumming up the works? Couldn’t “go slow to go fast” end up becoming “go slow to go slow”?
In other words, should we really bet our collective future on human beings working together, rather than fighting?
Moan was sympathetic to my fears. She also didn’t see another way forward.
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“We really need to think holistically about saving everything,” she said.
The sad truth is, not everything can be saved. Not if we want to keep the world livable for people and animals alike.
Some beloved landscapes will be left unrecognizable. Some families will be stuck paying high energy bills to monopoly utilities, even as some utility investors make less money. Some tortoises will probably die, pacing along fences in the heat.
The alternative is worse.
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In a nondescript building adorned with the LATAM logo sits a handful of Delta Air Lines employees — an arrangement that would’ve been unthinkable just a few years ago.
Earlier this month, Delta officially inaugurated its new South Florida offices, which are now in LATAM Cargo’s Miami headquarters.
There you’ll find about 10 full-time Delta employees, some of whom are working closely with LATAM to build out a joint-venture partnership between the two carriers.
The walls feature pictures of Delta and LATAM airplanes, and the space is so new that one of the conference rooms hasn’t even been built yet.
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The Delta employees working from this office even have a front-row view of LATAM’s cargo operations, watching as some of the airline’s freighters load and unload their goods before their next mission.
Every few minutes, you might even glimpse an American Airlines jet taking off in the distance — a somewhat ironic sight considering the circumstances.
Until mid-2020, the South American conglomerate LATAM was a member of the Oneworld frequent flyer alliance and a partner with American Airlines.
However, Delta wooed the airline away from its U.S. rival back in late 2019, in a move that shocked many industry observers. It acquired a 20% ownership stake in LATAM and also filed plans to begin a joint venture partnership (that includes profit sharing and schedule coordination) between the U.S. and South America.
That joint venture was approved in late September, and both Delta and LATAM have raced to implement it.
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Now that we’re nine months into the tie-up, Delta and LATAM invited me to check out their new digs and learn more about their nascent joint venture. Here’s what I learned.
Delta bolsters presence in key region
From Delta’s perspective, the joint venture was designed to quickly fill a noticeable gap in the airline’s global route map, Perry Cantarutti, senior vice president of alliances for Delta, said.
“When we looked at the world, that was one part of the world where we were not very well covered,” Cantarutti told TPG.
Before the tie-up, Delta was far from being the market leader in flights between the U.S. and South America. It offered just 122 flights on average a week between the two regions. Cirium schedules show that this was well below the 475 and 200 weekly flights American Airlines and United Airlines offered in 2019, respectively.
Nowadays, “We are together the No. 1 player between North and South America,” Cantarutti was proud to share.
The joint venture already connects more than 200 North American destinations served by Delta to the more than 120 South American destinations served by LATAM.
Also, at least nine new routes were teased as part of the pact, and five of them were formally announced, including:
Orlando-Bogota, Colombia (starts July 1)
Los Angeles-Sao Paulo (starts Aug. 1)
Miami-Medellin, Colombia (starts Oct. 29)
New York-Rio de Janeiro (starts Dec. 16)
Atlanta-Cartagena, Colombia(starts Dec. 22)
Together with some additional frequencies on existing routes, this translates to a 75% capacity increase since the pact was implemented — an impressive feat for such a new partnership.
Miami is becoming a ‘gateway hub’
When the joint venture was announced, Delta promised to turn Miami into a “gateway hub.”
Since then, Delta and LATAM have grown the Miami operation by nearly 40% more flights, according to Luciano Macagno, Delta’s managing director of Latin America, the Caribbean and South Florida.
From Miami, Delta has launched or recently increased service to Boston, Los Angeles, Orlando, Salt Lake City and Washington, D.C.
Additional domestic connectivity may be in the works. However, Delta’s existing domestic flights now cover most of the demand for travelers headed to or from Miami and those connecting beyond Miami into South America (and vice versa), Macagno said.
For instance, that short Orlando flight — a rare point-to-point route for Delta — is largely about funneling connections through Miami.
In addition to the new routes, Delta is upgrading its Miami terminal to better support the LATAM joint venture. This includes a more streamlined connecting experience when landing from an international destination, as well as adding Spanish signage across the entire facility.
Delta’s operations are co-located with LATAM’s in Miami (and a handful of other key airports). That’s a big improvement for travelers who used to connect from LATAM to American — a process that required a ton of walking and maneuvering around the airport.
The airline is also modernizing and expanding its Miami Sky Club to accommodate a total of 320 flyers with more than 12,000 square feet. Delta is even starting to insource its ground handling in Miami, too.
Although it’s not necessarily specific to Miami, Delta unveiled a Spanish version of its mobile app last week, a project that was accelerated due to the joint venture. Portuguese support is coming soon, according to Cantarutti.
Delta fills a bigger gap than American
When Delta purchased a stake in LATAM, it sent shockwaves throughout the aviation industry. The news upended some long-standing alliances throughout the hemisphere, perhaps most notably the deep-seated tie-up between American and LATAM.
While some industry insiders might’ve been surprised by the move, it makes total sense from LATAM’s perspective: Delta fills a bigger gap than American, providing access to more one-stop destinations for flyers.
“We’re very excited about the access to the interior of the U.S. and their gateways,” Marty St. George, chief commercial officer at LATAM, said in an interview.
Relative to American’s operation in Miami (the key connecting city under the American-LATAM pact), Delta’s Atlanta hub offers “many, many more destinations,” St. George said. “The thing I say to my team is that we will be selling customers to cities you have never heard of in your entire life.”
There is a “very, very long tail of demand to and from South America,” which accounts for roughly 20% of the traffic between the two continents, St. George added. The Delta joint venture enables LATAM to serve these cities with one-stop itineraries that wouldn’t have been possible with American.
While LATAM isn’t as big in Miami — the key U.S. gateway to South America — as it was with access to American’s big hub there, St. George isn’t worried. “We can manage Miami on our own … we have a lot of service there anyway,” he said.
SkyTeam membership could be coming
Delta and LATAM have already added reciprocal loyalty benefits, giving frequent travelers access to perks, such as lounge access, regardless of which airline they fly.
You can now earn and redeem miles on either airline, too.
But as exciting as the Delta partnership is, LATAM was once a key member of the Oneworld frequent flyer alliance. Membership in a global airline alliance helps boost connectivity and provides access to a broader network of customers. LATAM might consider joining Delta’s alliance, SkyTeam.
“Our focus right now is Delta … I think the concept of SkyTeam is a little bit in the future,” St. George said.
Pressed further, he added that the “experience working with Delta has been fantastic so far. They’re a great poster child for what the possible benefit of the SkyTeam would be.”
Reading between the lines, I wouldn’t be surprised if LATAM’s long-term plan includes membership in SkyTeam.
For now, though, it maintains a limited partnership with two Oneworld airlines, Iberia and Qantas, which help bolster its connectivity to Europe and Australia, respectively.
Metal neutrality is the goal
So far, executives at both airlines are happy with the progress that they’ve made in just under a year.
In the future, Delta and LATAM will continue working toward “metal neutrality,” Alain Bellemare, Delta’s president-international, said. This basically means that fares, loyalty benefits and the passenger experience will be aligned between both airlines.
The executive teams at both carriers meet once a quarter to go over long-term plans. They gather in cities that are commercially important to the joint venture, such as Atlanta, Miami and Lima, Peru.
While more route announcements and flyer benefits are in the works, both carriers are also doubling down on building their brands and awareness across the continents; this is especially true for Delta, which has historically been weak in South America.
Such measures include an advertising campaign and customer outreach across the continent. “We find it’s important because people don’t know what Delta is as a credit card or a faucet,” Cantarutti said.
Fast forward a few years, and I bet South American flyers will know Delta as the airline that’s partnered with LATAM — and vice versa in the U.S.
With the news this month that the housing market hit a milestone by showing the first year-over-year price decline in recent memory, homeowners who’d considered finally selling their home this year are finding themselves discouraged yet again.
What happened, they might wonder, to the not-so-distant glory days of frantic bidding wars and over-ask offers? Plenty of frustrated owners seem worried that the window for a fast and lucrative home sale might be shutting fast.
But here’s the reality: The U.S. housing market is no monolith. Although it’s true that many of the hottest markets of the past few years have seen prices fall in the wake of higher mortgage interest rates that broadly dampened home shoppers’ buying power, there are still cities where buyers continue to snatch up homes quickly and where sellers are getting their full asking price—or more.
This is why the Realtor.com® data team dug in to find the U.S. real estate markets that most favor sellers. (Sorry, buyers!)
The best places for sellers generally have persistently low housing inventory, strong demand from buyers, and often—but not always—lower prices that have room to swell. These are generally affordable metropolitan areas in the Northeast with a few in the Midwest.
Three of the metros on our list—Hartford, CT, Worcester, MA, and Providence, RI—are so close, you could tour homes in all of them in a single day. Our ranking also has one spot in the South and a somewhat bizarre outlier in California—more on that later.
To figure out if an area is a buyer’s or seller’s market, Pamela Ermen likes to track the change in the number of closed sales per month, compared with the change in the number of new listings per month.
“When sales are going up and inventory is going down, that’s a real seller’s market,” says Ermen, a Virginia Beach–based Realtor® at Re/Max and a speaker and coach at Real Estate Guidance.
Still, sellers who focus solely on low inventory can wrongly conclude that they can list their home at a higher price than an agent might advise. That can lead to their property languishing on the market not receiving strong offers. Meanwhile, buyers who focus only on the number of sales going down might wrongly think there’s less competition. That might result in heartache when they find out the hard way that many homes are still getting multiple offers.
To find true seller-friendly places, the Realtor.com data team looked at the May 2023 listing data for the 100 largest metropolitan areas. Then we ranked each based on the number of days that the median listing is on the market, combined with the portion of listings that have had the price reduced. These metrics tell us where homes are selling faster than average and with fewer sellers having to reduce their price to make the sale.
We selected just one metro area per state to ensure geographical diversity. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)
Here’s where sellers can expect the market to be most tilted in their favor this summer.
Median list price: $265,000 Median days on the market: 13 Listings with a price reduction: 1 in 17
Rochester, on the western edge of New York along the southern shore of Lake Ontario, not only is at the top of our seller’s saviors list—it’s also in a class of its own. Rochester had both the lowest number of days on the market and the lowest portion of listings with a price reduction. But this is nothing new for the so-called Flower City.
The metro area has become a mainstay of the Realtor.com hottest real estate markets list. It’s also where sellers are usually still getting their asking price, and where buyers can find one of the largest selections of homes for less than $200,000. Plus, home prices are well below the national median list price of $441,500 in May.
These affordable homes have made the area appealing to locals, out-of-towners, and investors.
“If you’re priced right in our market, you can expect to still sell in about one week,” says Jenna May, a local real estate agent at Keller Williams Realty.
When the market was at its pandemic peak in 2022, and even before anyone had heard of COVID-19, Rochester was still leading the nation in the low number of days on the market. Demand here for homes is high and seems destined to stay that way.
“There are people who are offering $80,000 over listing price and not getting the home,” says May. “It’s that competitive.”
Median list price: $424,925 Median days on the market: 19 Listings with a price reduction: 1 in 14
The capital city of Connecticut is also no stranger to the Realtor.com list of the nation’s hottest real estate markets. Hartford is the largest population hub in the state, with 1.2 million residents.
It also boasts home prices that are about 5% below the national median.
“The Northeast has been well undervalued compared with other markets—and not just for years, but for decades,” says Lisa Barrall-Matt, a senior broker at Berkshire Hathaway in West Hartford.
Homes in the Hartford area have been priced $100,000 less than comparable homes in other markets, Barrall-Matt says, for so long that she began to take it for granted.
Now, she’s feeling vindicated: “I used to say, ‘Why aren’t prices higher?’ Now I’m saying, ‘Where’s the ceiling?’”
Median list price: $622,500 Median days on the market: 24 Listings with a price reduction: 1 in 13
Portland became a popular pandemic destination for Northeasterners looking for a scenic, coastal city with some great restaurants, entertainment, and a brewery scene. The area has a rich history, having a Native American presence dating more than 10,000 years before becoming an early Colonial settlement.
The above-average prices in this artsy city on Casco Bay aren’t keeping sellers from enjoying quick sales. In fact, few listings are getting marked down. The demand for housing here is just so strong. Portland has been featured on our list of the best places to retire in 2022, and it has one of the last year’s hottest neighborhoods: Windham, just on the northwestern edge of Portland proper.
Prices in Portland have grown significantly faster during the pandemic—from May 2019 to now—than they did in most of the country. Where prices rose about 40% nationally, prices in Portland have grown by about 62%. Just since this time last year, prices rose 17%.
A newer four-bedroom home in South Portland that’s within walking distance of Fore River is listed for $650,000, close to the area average.
Median list price: $517,450 Median days on the market: 19 Listings with a price reduction: 1 in 10
Worcester, about 40 miles west of Boston, was nicknamed the “Heart of the Commonwealth” because of its central location in Massachusetts.
This medium-sized metro has a name that’s fun to say, like “rooster” but with a W. But it simply doesn’t have enough homes to match the high interest from potential buyers, according to Nick McNeil, a local Realtor with the Lux Group.
“The amount of demand and the absolute lack of inventory is nuts,” he says. “And there’s not much room for new construction in this area, with tight regulations on what can be built.”
Until there’s some kind of change in the supply and demand dynamic in the area, McNeil says, it’s going to be hard for buyers, and relatively easy for sellers—as long as they’re not also trying to buy.
“The best situation you can be in is if you can sell now,” he says.
Median list price: $384,250 Median days on the market: 25 Listings with a price reduction: 1 in 10
Amid the rolling hills of Eastern Pennsylvania’s Lehigh Valley, about 60 miles northwest of Philadelphia, Allentown has a few things going for sellers right now. The portion of homes with a price reduction is about half the national average, and homes are selling about 40% faster.
Like some other places on this list, the homes in this historic steel town are priced below the national average. But local incomes are a bit higher than average, offering buyers more affordability. That’s helping the real estate market to remain competitive as buyers seek out deals.
Allentown offers a mix of urban, suburban, and rural lifestyles, making it broadly attractive for buyers.
What’s especially notable about the area is the price growth over the past several years. Allentown metro prices have risen by 78% since before the pandemic, ahead of all the other places on this list.
For about the local median price in Allentown, buyers can find a five-bedroom bungalow in the Hamilton Park neighborhood west of downtown Allentown.
Median list price: $374,950 Median days on the market: 29 Listings with a price reduction: 1 in 11
Perched on the western shore of Lake Michigan in southeastern Wisconsin, Milwaukee is known for its breweries, including Miller and Pabst. It’s also where Harley-Davidson was founded. And it’s been a staple of housing affordability for some time.
However, prices have been rising in Milwaukee’s metro area: They rose by around 11% compared with this time last year.
The median number of days on the market is below the average now, just like it was before the pandemic. The same goes for the portion of listings with a price reduction. This is all very good news for home sellers hoping for a quick, profitable sale.
For $375,000, a buyer can get a large, four-bedroom home just 5 minutes from hiking trails, a golf course, and a dog park, all along the shoreline.
Median list price: $386,973 Median days on the market: 29 Listings with a price reduction: 1 in 9
The Virginia Beach metro area, a popular vacation spot for beach, maritime history, and seafood lovers, is another place where incomes are higher than average and home prices are lower.
Last year, sellers could count on getting multiple offers, usually leading to potential buyers bidding up the price, says Virginia Beach–based Realtor Ermen. Now, it’s not as easy to figure out that pricing sweet spot. If the home is listed too high, that’s when there’s eventually pressure to reduce the price.
In the month of May, even with a low number of price reductions, Erman says, “90% of price reductions were made before the listing hit the average time on market.”
That indicates sellers are getting antsy, and probably would have been better off pricing the home lower to begin with. But homes that are priced to sell are still moving briskly.
Median list price: $1,530,000 Median days on the market: 25 Listings with a price reduction: 1 in 9
San Jose is the oddball on this list.
Nestled in the heart of Silicon Valley, it is one of the most expensive real estate markets in the nation. Homes in this San Francisco Bay Area hot spot cost more than triple the national average, which means real estate attracts a very specific buyer.
Because San Jose is a global technology hub, its population is very diverse, and not just racially or ethnically. Roughly 40% of residents were born outside of the U.S., according to the U.S. Census Bureau. Most significantly, many residents have tons of money to spend, whether they’re high-salaried tech employees or they have had an entrepreneurial startup windfall.
Local real estate agents will tell you that San Jose is simply insulated from many of the market dynamics because the clientele is so wealthy. If they’re making an all-cash purchase, they don’t have to worry about higher mortgage rates. And that’s a big boon for sellers.
Median list price: $539,950 Median days on the market: 31 Listings with a price reduction: 1 in 10
Providence, home to Brown University and the Rhode Island School of Design, is a bustling town filled with older homes. About 50 miles southwest of Boston, it’s one of the medium-sized, Northeastern metros on our list that are enjoying especially strong housing markets right now.
Providence prices are significantly above the national average, but compared with nearby Boston, where the median list price is north of $850,000, Providence is a downright bargain.
Plus, it’s got a lot going for it. It boasts beautiful scenery along the Seekonk River, a thriving arts scene, and good jobs. The headquarters for CVS is located in nearby Woonsocket.
In Providence, for $550,000, a little above the local average, buyers can find a midcentury two-bedroom home with classic brick construction about 15 minutes from downtown.
Median list price: $229,950 Median days on the market: 31 Listings with a price reduction: 1 in 9
Home prices in this Rust Belt city, which has struggled in more recent years, are still dramatically lower than the national average—about 45% less expensive. And with the focus of buyers on affordability, it’s no wonder that Toledo has taken off.
In the past year, median list prices in Toledo have risen by 25% (10% per square foot), which is quite a bit higher than before the pandemic.
For less than the median list price in Toledo, buyers can get a massive, six-bedroom home in Toledo’s Old West End neighborhood, just northwest of downtown.
What if you could tame long-term inflation? Right now, this is one of the biggest questions in financial circles. After nearly 40 years of very stable money, in 2021 and 2022 prices surged. For the first time in a generation, inflation seriously beat the Federal Reserve’s 2% benchmark.
As of July 2023, this immediate problem appears to be easing somewhat. But investors as a group are understandably spooked. Was last summer’s 9% inflation rate a one-shot problem brought on by the unique conditions of a pandemic economy, massive federal spending and a destabilizing war? Or will inflation return as a cyclical issue?
Consider working with a financial advisor to build an investment portfolio that accounts for inflation.
Financial advisor and author Allan Roth of ETF.com thinks that investors would be wise to prepare in case inflation remains high, or even surges back to 2022 levels. This is a particular risk, he warns, for retirees without the luxury of new wages that keep pace with higher prices.
What if, he writes, inflation averages 5% during your retirement? Over the course of 20 years, a retiree who started out withdrawing $4,000 per year from a given account would need to increase those withdrawals to $10,613 just to keep up with prices. This could easily shatter carefully planned finances.
To fix this, Roth writes, “I built and purchased a 30-year TIPS ladder with roughly $1 million of my own money… By buying as close as possible to bonds maturing each year, I was able to create a 30-year cash flow paying me an inflation-adjusted average of $43,800, or 4.38% annually.”
In other words, by building a TIPS ladder fund, Roth argues that he has added a stable source of inflation-protected income to his retirement fund. A TIPS ladder fund could help investors hedge against both market risks and inflation. While not explicitly a “growth” strategy, it could be a very strong security-oriented strategy for retirees. Here’s how it works.
How a TIPS Ladder Fund Works
A ladder fund is a portfolio of maturing assets, like bonds or CDs, built around staggered maturity dates. For example, you might buy a portfolio with bonds that mature in 5, 10, 15 and 20 years. This fund would “ladder,” as the bonds would mature in stages like the rungs of a ladder, as opposed to all at once.
The idea behind a ladder fund is to hedge against timing risk. For example, say you had invested in bonds in 2019, when rates were extremely low. A portfolio of long-term assets might be stuck with low-value, low-yield assets. A ladder fund, on the other hand, would have short-term bonds. As those assets mature, you could collect back your principal and invest in new, higher-interest assets.
A TIPS bond, or Treasury Inflation Protected Security, is a marketable Treasury asset built to correct for inflation. Each month the Treasury adjusts the underlying principal on all TIPS bonds based on the Consumer Price Index. When the bond matures, the holder receives the greater of either the bond’s original value or its inflation-adjusted value. Since the bond calculates interest based on its underlying principal, this means that the asset’s periodic interest payments will also increase based on inflation.
A TIPS ladder fund, as suggested by Roth, is a portfolio built out of TIPS bonds with staggered maturity dates. This, he argues, would provide a source of inflation-protected income, due to the structure of a TIPS bond, while also giving investors a hedge against market timing risks due to the periodic maturity of the ladder.
Can TIPS Ladders Protect Your Money From Inflation?
While a niche and technical idea, the TIPS ladder fund has been well received. Morningstar’s John Rekenthaler writes that it can potentially offer investors a strong supplement to more traditional assets like stocks and annuities.
“TIPS ladders take the concept of bond ladders a giant leap further,” Rekenthaler writes. “Whereas traditional ladders merely reduce investment risk, TIPS ladders eliminate the possibility entirely. In that they are unique. Conventional Treasuries face no conceivable credit risk, but they certainly court inflation risk… In contrast, every inflation-adjusted penny from a TIPS ladder is known in advance.”
Thanks to the combination of bond interest payments and inflation adjustment, you can know exactly what this portfolio will pay out for its entire lifetime. Thanks to its nature as a government asset, you can know that this portfolio will not default. That’s about as much security as anyone can ask for.
Does this mean that TIPS ladders will be an investor’s forever home? Not entirely, as there are two main catches to this portfolio. First, a TIPS ladder is difficult and expensive to construct, with relatively marginal yields on low-value transactions. As a result, most retail investors won’t have the skill set or capital to build a useful TIPS ladder on their own.
This is why both Rekenthaler and Roth recommend an ETF that offers this structure. A large-scale fund, built and managed by professional investors, could solve both the complexity and the funding problems. Retail investors could buy in using the flexibility of the ETF structure, making this far more practical for them.
Second, a TIPS ladder still offers government interest rates. The reliability of a Treasury asset comes at the cost of lower returns relative to the market at large, even if those returns are inflation protected. This is why Rekenthaler points out that a TIPS ladder should be treated as a specialized asset rather than an all-purpose investment.
“The concept is unsuited for workers,” he writes, “as they attempt to grow their assets rather than spend them… However, to the extent that Social Security payments fail to meet a retiree’s fixed expenses, a TIPS ladder fund would fill the gap – more neatly, I think, than any conceivable competitor.”
A TIPS ladder might not help you build the retirement account that you need. For that, higher-value assets like stocks will probably do better. But once you approach retirement, it might help you build exactly the kind of security that you need. It’s a good investment to keep an eye out for.
Inflation Investing Tips
A financial advisor can help you build a comprehensive investing plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Check out SmartAsset’s inflation calculator to get a quick estimate of the buying power of a dollar over time.
Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
Life insurance provides financial protection to individuals and their loved ones in the event of unexpected circumstances. One key aspect to consider when choosing a life insurance policy is whether it generates immediate cash value. In this article, we will explore different types of life insurance policies and discuss which ones offer the benefit of immediate cash value.
Life insurance policies are critical financial planning tools designed to provide financial security for policyholders’ beneficiaries upon their demise. They work by offering a lump-sum payment, known as a death benefit, to beneficiaries after the insured person’s death.
But some life insurance policies offer an additional feature – the accumulation of cash value over time.
This is a unique feature that allows the policyholder to access a portion of the insurance money during their lifetime. This article will delve further into the types of life insurance policies that generate immediate cash value.@media(min-width:0px)#div-gpt-ad-goodfinancialcents_com-medrectangle-3-0-asloadedmax-width:300px!important;max-height:250px!important
Table of Contents
Decoding Cash Value in Life Insurance
The cash value in a life insurance policy is a savings component that grows over time. This feature is inherent in permanent life insurance policies, unlike term life insurance policies that only provide coverage for a predetermined period.
When a policyholder pays premiums towards a permanent life insurance policy, a portion of these payments contributes towards building the cash value.
This cash value grows over time and can be accessed by the policyholder during their lifetime, offering an extra layer of financial security.
Understanding Different Life Insurance Policies
The life insurance market is diverse, offering several types of policies. Some of the main types include term life insurance, whole life insurance, and universal life insurance. Each of these has its unique features, advantages, and suitability for different individuals.
Term Life Insurance
As highlighted by CNBC, term life insurance is designed to offer coverage for a specific period, typically 10, 20, or 30 years. If the policyholder passes away during this term, the insurance company pays a death benefit to the beneficiaries.
But according to financial experts like Dave Ramsey, it could be the best option for most people because it’s simple and affordable. It’s like an umbrella for a rainy day, shielding your loved ones financially if you pass away during the policy term.
However, term life insurance does not provide any cash value component. It’s often chosen for its affordability and simplicity, focusing solely on providing financial protection in the event of the policyholder’s death during the policy term.@media(min-width:0px)#div-gpt-ad-goodfinancialcents_com-banner-1-0-asloadedmax-width:580px!important;max-height:400px!important
Whole Life Insurance
Whole life insurance, as the name suggests, offers coverage for the insured person’s entire lifetime, as long as the premiums are paid. Unlike term life insurance, it combines a death benefit with a cash value component.
A portion of the premiums paid contributes to this cash value, which grows over time. Importantly, this growth is at a guaranteed rate, offering predictability and security for the policyholder. According to The Motley Fool, this type of insurance is often more expensive than term life insurance due to this cash value component and the lifetime coverage it provides.
Universal Life Insurance
Universal life insurance is another type of permanent life insurance policy that combines a death benefit with a cash value component. However, it differentiates itself with its flexibility in premium payments and death benefits. The cash value component in universal life insurance grows based on prevailing market interest rates. @media(min-width:0px)#div-gpt-ad-goodfinancialcents_com-large-leaderboard-2-0-asloadedmax-width:300px!important;max-height:250px!important
Policyholders can adjust the premium amount and death benefit within certain limits, providing them with a degree of control over the policy’s costs and benefits.
Among the various life insurance policy options, it’s the whole life insurance and universal life insurance policies that generate immediate cash value. From the moment these policies are enforced, the cash value starts growing, offering policyholders access to a part of their insurance payout during their lifetime.
Whole Life Insurance and Cash Value
With whole life insurance policies, the cash value grows at a guaranteed rate, offering a predictable savings growth mechanism. The cash value in whole life insurance is built from the premiums paid by the policyholder. This cash value can be borrowed against, offering a valuable source of funds when needed. Alternatively, the policyholder can choose to surrender the policy and receive the accumulated cash value.
Universal Life Insurance and Cash Value
Universal life insurance is a form of permanent life insurance policy that combines the death benefit of term insurance with a cash value component. This type of policy is known for its flexibility, as it allows policyholders to adjust the premium payments and death benefit within certain limits. This flexibility can be instrumental in managing life’s financial uncertainties.
The cash value in universal life insurance grows based on prevailing market interest rates, offering the potential for significant growth during periods of high interest rates. It’s important to note that while this offers an opportunity for financial gain, it can also present challenges. In periods of low-interest rates, the cash value growth can slow down, potentially affecting the policy’s overall value.
Policyholders can access the cash value in a universal life insurance policy through withdrawals or policy loans. This can offer valuable financial flexibility in times of need.
A Word of Caution on Universal Life Insurance
While universal life insurance offers flexibility and potential cash value growth, it’s not without risks. According to the New York Department of Financial Services, policyholders must be cautious about the fluctuating costs and benefits of these policies.
Interest rates can fluctuate, and when they’re low, the cash value of a universal life insurance policy may not grow as expected. This could mean that the policyholder has to pay higher premiums to keep the policy active, especially if the policy costs are being paid from accumulated cash value.
Policyholders should regularly review their universal life insurance policies. If the policy’s cash value is depleting faster than expected, or if the policy costs are increasing, it might be necessary to adjust the premiums or the death benefit to keep the policy in force.
Beware of UL Insurance
Universal life insurance policies also often have complex cost structures, with various fees and charges that can affect the cash value and the death benefit. It’s important to understand these costs and to consider them when deciding on a universal life insurance policy.
Factors Influencing Cash Value Growth
@media(min-width:0px)#div-gpt-ad-goodfinancialcents_com-leader-1-0-asloadedmax-width:336px!important;max-height:280px!importantThe growth of cash value in a life insurance policy is subject to several factors. These can vary greatly from policy to policy, and understanding them can help policyholders make an informed decision. The following are some critical factors:
Premium Payments
The amount of premium paid and the frequency of the payments directly impact the growth of the cash value. Regular and timely premium payments can accelerate the accumulation of cash value over time.
Policy Expenses
Insurance policies come with various expenses, such as administrative fees, mortality charges, etc. These charges are typically deducted from the premium payments before the remaining amount is allocated to the cash value component, thus potentially affecting its growth rate.
Interest Rates
The interest rate at which the cash value grows plays a significant role in its accumulation. A higher interest rate leads to a quicker accumulation of cash value, while a lower rate may slow it down. This is particularly relevant for universal life insurance policies where the interest rate is tied to the prevailing market rates.
Opting for a life insurance policy with immediate cash value can offer several benefits:
Financial Flexibility: The cash value in these policies can be accessed during the policyholder’s lifetime, providing financial flexibility for various needs such as emergencies, education expenses, or retirement planning.
Asset Accumulation: The cash value component of the policy acts as an asset that can grow over time. It can serve as a source of additional funds or supplement retirement income.
Borrowing Options: Policyholders can borrow against the cash value of their life insurance policy. This can be a convenient source of funds without the need for a separate loan application or credit check.
Tax Advantages: The growth of cash value in a life insurance policy is typically tax-deferred. This means that policyholders can enjoy the growth without immediate tax obligations until they withdraw or surrender the policy.
Considerations When Choosing a Policy
When selecting a life insurance policy with immediate cash value, it’s important to consider the following factors:
Financial Goals: Determine your financial goals and how the policy aligns with them. Consider whether you prioritize cash value growth, death benefit coverage, or a combination of both.
Premium Affordability: Evaluate your budget and ensure that the premium payments are affordable in the long run. Remember that missing premium payments can impact the cash value growth and policy coverage.
Long-Term Planning: Assess your long-term financial plans and how the policy fits into them. Consider factors such as retirement, education expenses, and other financial milestones.
As Life Happens points out, life insurance is valuable at any age. It’s not just for when you’re in your golden years and start worrying about leaving a financial safety net for your loved ones. With policies that offer immediate cash value, you’re getting both protection and a financial resource you can access during your lifetime.
Remember that gem of a piece of advice from Dave Ramsey? He says, “Term life insurance is bought, while whole life insurance is sold.”
This simply means that term life insurance, with its lower cost and straightforward benefits, is generally the go-to choice for most people. But the whole life insurance policies, with their additional features, are actively promoted by insurance companies.
Keep in mind that in the wild world of insurance, there’s no right or wrong choice, only what works best for you. It’s like trying to choose between a coffee and a milkshake – they both have their perks, but it ultimately depends on your taste (or in this case, your financial goals).
Are you someone who wants protection with the added benefit of cash value growth, or do you prefer a no-frills approach with just coverage? Can you consistently afford the premium payments to reap the full benefits? How does a policy fit into your long-term plan, considering things like retirement, education expenses, or other financial milestones?
Term Life Insurance
Cash Value Policy (Whole/Universal Life)
PROS
Cost
Generally cheaper
More expensive, but part of premium builds cash value
Simplicity
More straightforward as it provides only a death benefit
More complex due to the cash value component
Duration
Fixed term (usually 10, 20, or 30 years)
Provides coverage for the entire lifetime of the policyholder
Financial Flexibility
No cash value or loan option
Offers a cash value component that can be borrowed against
Investment
No investment component
Can be viewed as an investment due to cash value growth
CONS
Cost
No cash value or return of premium if the term expires before death
Higher premiums due to the cash value feature
Duration
Coverage ends if the term expires before death
Might be unnecessary if coverage is not needed for entire life
Complexity
Doesn’t require much management
Requires active management due to the cash value component
Risk
No risk as it only provides death benefit
The cash value growth might be slower than other investments
Flexibility
No option to borrow against the policy
Policyholders can borrow against the cash value, but this can reduce the death benefit
Choosing a life insurance policy with immediate cash value can provide both protection and financial flexibility. Whole life insurance and universal life insurance policies are two types that offer this benefit. Understanding the factors that influence cash value growth and considering personal financial goals are crucial when making a decision. By selecting the right policy, individuals can secure their loved ones’ future while also building a valuable asset.