Starter home prices have increased by 45% since the COVID-19 pandemic. (iStock)
Gen Z and Millennial home buyers are having a hard time purchasing a home on their own. Approximately 36% of young buyers plan to receive a cash gift from a family member as a down payment on a home. Redfin research found.
The percentage of Millennials receiving help from their parents has increased in recent years. In 2019, 18% of Millennials used cash gifts as a down payment, increasing to 23% in 2023.
Cash gifts aren’t the only thing Gen Z and Millennials are using. Some plan to use inherited assets for a down payment, and 13% plan to live with their parents or other family members to save money for a down payment.
“Nepo homebuyers are increasingly at an advantage compared to first-generation homebuyers.Housing costs have risen so high that many young people with family money are no longer working. Even when you have it and you’re making a pretty respectable income, you still get help from your mom and dad,” Darryl Fairweather said. said Redfin’s chief economist.
For other young buyers who don’t have family members who can afford a down payment gift, working and saving is the most common way to eventually cover the down payment. About 60% of Redfin survey respondents said they were saving directly from their paychecks, and 39% said they were likely working a side job to help them buy a home in the future.
“The bigger problem is that young Americans whose families don’t have money are often locked out of homeownership,” Fairweather said. ”Although many of them have good incomes, they are unable to afford housing due to their generational disadvantage. They don’t have family money to spend. ”
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Lower mortgage rates save homebuyers thousands of dollars: REDFIN
Starter home prices are up 45% compared to pre-pandemic levels
Over the past few years, purchase prices, especially for entry-level homes, have risen sharply, making it harder for younger generations to afford housing.
The typical starter home sold for $243,000 last June, a 2.1% increase from a year ago and a 45% increase from pre-pandemic. Redfin Analytics found.
To realistically afford a starter home, first-time buyers need to earn about $64,500 per year. Compared to last year, he has also increased by $7,200. Rising home prices and rising mortgage rates are contributing to this higher income requirement.
“Buyers looking for starter homes in today’s market are in hot pursuit, because starter homes don’t exist anymore in many parts of the country,” said Sheharyar Bokhari, senior economist at Redfin.
“The most affordable homes for sale are no longer affordable to those on a budget due to a combination of rising prices and rising interest rates. This is putting many Americans out of the housing market. They are completely shut out, preventing them from building equity and ultimately lasting wealth.”
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Homebuyers considering buying a smaller home or a fixer-upper to combat rising home prices.
Home sales fall after surging in February
Buying a home remains difficult, as evidenced by the decline in existing home sales in March. Sales decreased by 4.3% to 4.9 million. Fannie Mae reported.
This decline reversed the sales spike that occurred in February. Rising mortgage rates and persistently high home prices are causing buyers to exit the market.
Although sales are decreasing, the number of listings is increasing as the spring buying season has arrived. The proportion of available housing increased by 4.7% to 1.11 million units.
Although existing home sales are down, construction of new homes remains strong.of National Association of Home Builders/Wells Fargo Housing Market Index It rose 3 points to 51 in March, showing buyers are still interested in buying new construction.
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