More than one-third of Gen Z and Millennial homebuyers are asking for help from their parents as a down payment for their first home amid rising home prices and soaring mortgage rates, according to a recent study. In need of financial assistance.
Dubbed “nepo” buyers – a nod to the “nepo baby” phenomenon in which children of famous people piggyback on them to gain a foothold in the career ladder – many of these young people are in the so-called $300,000 housing market. feels increasingly out of reach. “Starter houses” are a thing of the past.
“Nepo homebuyers are increasingly favored over first-generation homebuyers,” said Redfin chief economist Darryl Fairweather. The real estate company surveyed 3,000 U.S. homeowners and renters.
“Housing costs have risen so high that many young people who own a household are being helped by their mom and dad, even when they have a job and earn a respectable income.”
According to a study by Redfin, 36% of Gen Z (ages 12 to 27) and Millennials (ages 28 to 43) expect a cash gift from family as a down payment. That number was double what it was just five years ago.
An additional 16% expect to use their inheritance to fund a down payment, and 13% plan to live with their parents or other family members, according to a previously reported Redfin report. luck.
“The bigger problem is that young Americans whose families don’t have the money are often locked out of homeownership. Many of them have good incomes but are generationally disadvantaged, so I can’t afford a house,” Fairweather added.
Almost half (43%) of Gen Z and Millennials told Redfin that they are unlikely to buy a home anytime soon because it is off-market.
Approximately 34% cite inability to save for a down payment as a reason for not purchasing a home. On the other hand, when asked why Americans are less likely to buy a home, the second most common answers are being able to afford a mortgage and having high mortgage payments. Interest level.
Current mortgage interest rates are hovering around 7%, about twice as high as when Biden took office.
Among Gen Z and Millennials who don’t plan to buy a home in the near future, 16% cite lack of financial support from family and friends as the reason, Redfin found.
According to the report, the average sales price of the 662,000 new homes sold nationwide last month was a whopping $485,000. U.S. Census Bureau.
In February 2019, before COVID-19, that amount was down about 35% to $315,300, according to census reports.
Housing supply also remains below historical averages. As of the end of last month, there were 1.07 million unsold homes on the market, an increase of 5.9% from January and a 10.3% increase from the same month last year.
This is the highest number of homes for sale in February since 2020, the National Association of Realtors announced last week.
The ability to save to buy a home is also being held back by inflation, as the Federal Reserve struggles to lower the rate to its 2% target.
U.S. inflation rose 3.2% in February, according to the latest Consumer Price Index, which tracks changes in the cost of everyday goods and services.
Fed interest rates are currently hovering between 5.25% and 5.5%, a 22-year high, and some believe they will eventually be cut at the June meeting of central bank governors.
