Young Buyers Receive Down Payment Help
Approximately 38% of recent homebuyers under age 30 have received outside help toward making a down payment on their new house, according to a Redfin survey conducted earlier this year.
Americans ages 65 and older are two times more likely to be homeowners than their younger (35 and under) counterparts. With homeownership becoming more expensive, first-time buyers have a significantly harder time affording homes.
“Nepo-homebuyers” is the label sometimes used for these young buyers who receive help from family members when buying a home or paying a down payment. According to the survey where 509 homebuyers were under age 30, 23% used a cash gift from family and 21% used inheritance money for their down payment.
Many young homeowners attribute the financial help they received from their families to the reason why they were able to buy their first home and, subsequently, any home thereafter. Starter homes are becoming increasingly unaffordable, causing first-time buyers to struggle when taking the first step toward lifelong homeownership.
Those without family money to fall back on have faced even greater difficulties when put up against the housing market. Research shows that children born to homeowner parents are significantly more likely to be homeowners themselves in adulthood. A 2021 Redfin survey found that of 1,500 homeowners, 79% had a parent who owned a home and 67% had a grandparent who owned a home.
The National Association of Realtors®’ Profile of Home Buyers and Sellers report highlighted that White Americans made up the majority of homebuyers (88%), followed by Hispanic Americans (8%), Black Americans (3%), Asian Americans (2%) and other (3%). Of all racial groups, Black Americans drew down 401k/pension funds the most for their down payments (16%) and Asian Americans received gifts (22%) and loans (7%) from family or friends the most for theirs.
With nearly 40% of young homebuyers receiving financial support from their family, generational wealth and the persisting inequities of the past can be further acknowledged. Many older homeowners have had children and grandchildren with more opportunities, including homeownership. Those born into families with generational wealth are more likely to receive help buying a home and more likely to be able to afford to do the same for their children. By Hope Walborn