Nepo-Homebuyers: More Than One-Third of Gen Z and Millennial Homebuyers Plan to Use Family Money For Down Payment
March 27 2024 - 10:27AM
Business Wire
Young Americans who have the means are turning
to family for help with down payments as housing costs soar.
(NASDAQ: RDFN)—More than one-third (36%) of Gen Zers and
millennials who plan to buy a home soon expect to receive a cash
gift from family to help fund their down payment, according to a
new report from Redfin (redfin.com), the technology-powered real
estate brokerage.
Young homebuyers are also receiving help from family members in
other ways. Roughly one in six (16%) Gen Zers and millennials say
they’ll use an inheritance to help fund their down payment, and 13%
plan to live with their parents or other family members to save
money for down payments.
Working to earn money is the most common way for young buyers to
fund down payments: 60% report they’ll save directly from
paychecks, and 39% are likely to work a second job, the most common
responses to this question.
That’s based on a Redfin-commissioned survey conducted by
Qualtrics in February 2024. The nationally representative survey
was fielded to roughly 3,000 U.S. homeowners and renters.
Young homebuyers are twice as likely to use family money for
down payment than they were 5 years ago
Just 18% of millennials used a cash gift from family to help
fund their down payment in 2019, according to a Redfin survey from
that time, and the share had only increased to 23% by 2023. Note
that the 2019 and 2023 survey results noted here are for
millennials only, while the results in this report are for
millennials combined with Gen Zers.
Young Americans are increasingly turning to family to help fund
down payments largely because it’s increasingly expensive to
purchase a home. U.S. home prices are up nearly 40% from before the
pandemic, and they rose 7% in the last year alone, with low
inventory propping up prices despite dwindling demand.
In many ways, Gen Zers and millennials face a more difficult
financial landscape than their parents did at the same age: Their
wages are lower than their parents’ wages were, they have more
student loan debt, and inflation has pushed up the cost of nearly
everything, including housing.
The fact that so many young Americans rely on help from family
to afford a down payment is emblematic of the fact that housing is
simply too expensive. A recent Redfin analysis found that starter
homes are getting much more difficult to afford, pricing many
Americans out of the starter-home market altogether. People without
financial help from family are at a major disadvantage when it
comes to purchasing a home.
“Nepo-homebuyers have a growing advantage over first-generation
homebuyers. Because housing costs have soared so much, many young
adults with family money get help from Mom and Dad even when they
have jobs and earn a perfectly respectable income,” said Redfin
Chief Economist Daryl Fairweather. “The bigger problem is that
young Americans who don’t have family money are often shut out of
homeownership. Many of them earn a perfectly good income, too, but
they aren’t able to afford a home because they’re at a generational
disadvantage; they don’t have a pot of family money to dip into.
This contributes to wealth inequality and often prevents young
people from gaining economic ground on their peers who come from
more privileged backgrounds. The American Dream is just as much
about class mobility as it is the home with a white-picket fence,
and the housing affordability crisis has made both elements of the
dream harder to attain.”
Survey results show that lack of affordability is biggest
barrier to homeownership for young Americans
Among the young Americans who aren’t likely to buy a home in the
near future, lack of affordability is the biggest barrier.
Nearly half (43%) of Gen Zers and millennials say they’re
unlikely to purchase a home soon because the homes on the market
are too expensive, the most common response. Roughly one-third
(34%) say their ability to save for a down payment is a barrier to
buying a home, the next most common response, followed by ability
to afford mortgage payments (29%) and high mortgage rates
(29%).
Of the Gen Zers and millennials who aren’t planning to buy a
home in the near future, 16% cited lack of financial support from
family or friends as a reason.
More than one in 10 (12%) young Americans said they need to pay
off student loans before they would be able to purchase a home.
To view the full report, including charts and survey
methodology, please visit:
https://www.redfin.com/news/gen-z-millennial-down-payment-family-help
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate
company. We help people find a place to live with brokerage,
rentals, lending, title insurance, and renovations services. We run
the country's #1 real estate brokerage site. Our customers can save
thousands in fees while working with a top agent. Our home-buying
customers see homes first with on-demand tours, and our lending and
title services help them close quickly. Customers selling a home
can have our renovations crew fix it up to sell for top dollar. Our
rentals business empowers millions nationwide to find apartments
and houses for rent. Since launching in 2006, we've saved customers
more than $1.6 billion in commissions. We serve more than 100
markets across the U.S. and Canada and employ over 4,000
people.
Redfin’s subsidiaries and affiliated brands include: Bay Equity
Home Loans®, Rent.™, Apartment Guide®, Title Forward® and
WalkScore®.
For more information or to contact a local Redfin real estate
agent, visit www.redfin.com. To learn about housing market trends
and download data, visit the Redfin Data Center. To be added to
Redfin's press release distribution list, email press@redfin.com.
To view Redfin's press center, click here.
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version on businesswire.com: https://www.businesswire.com/news/home/20240327295586/en/
Redfin Journalist Services: Kenneth Applewhaite, 206-414-8880
press@redfin.com
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