EconomyUS News

38% of young homebuyers in the US needed family assistance to enter the housing market due to high prices

According to a Redfin survey, 38% of homebuyers under 30 received financial assistance from their families to afford a down payment. This assistance often took the form of cash gifts or inheritances. The rising cost of first-time homeownership has led to more young individuals being unable to enter the market.

The increasingly expensive housing market poses distinct challenges for younger Americans with lower incomes and limited savings. According to a recent Redfin survey conducted in the spring, 38% of buyers under the age of 30 had to turn to their families for financial assistance to cover their down payment, often through cash gifts or inheritances. In a Forbes column, Daryl Fairweather, Redfin’s chief economist, noted that the high cost of entry into homeownership is effectively shutting out many young individuals who don’t have access to family funds.

“In light of this, a significant proportion of young homeowners can be categorized as ‘nepo-homebuyers,’ signifying that they relied on family financial support to acquire their homes,” the author stated. “This trend amplifies intergenerational wealth inequality and constrains economic prospects for both young individuals and their families.”

Among the 509 respondents under the age of 30 in the survey, 23% disclosed that they used monetary gifts from their families, while 21% cited inheritance funds as their source.

It’s worth noting that individuals under 30 typically do not purchase homes, as they are often in the early stages of their careers and may not yet have the financial capacity to pool incomes with a partner.

Data from the National Association of Realtors reveals that in 2022, the average age for first-time homebuyers was 36, up from 33 in the previous year.

Moreover, the national average age for marriage, often seen as a milestone for entering the housing market, stood at 30 for women and 32 for men in 2022, according to a recent wedding study by The Knot.

Unfortunately, the situation is exacerbated by the rising costs of starter homes, which have surged by 13% in the past year alone, as noted by Fairweather. In June, the median sale price for a typical starter home reached a record high of $243,000.

Compounding the issue is the ongoing housing inventory shortage, with mortgage rates hovering around 7%. Many existing homeowners, who secured lower rates in the past, are hesitant to sell in the current market, further worsening affordability concerns.

Fairweather also highlighted a 2021 Redfin survey, which found that 79% of homeowners had parents who owned their homes, and 67% had grandparents who owned homes.

“Today’s young homeowners often come from families where homeownership traces back to a time when it was legal to discriminate against potential buyers based on race, religion, national origin, disability status, or family situation, before the Fair Housing Act was enacted,” she added. “Since homeownership tends to persist across generations, historical inequities continue to impact the present.”

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *