1 in 3 First-Time Buyers Turn to Their Family for Help
CHICAGO – One-third of first-time buyers (27%) turned to family and friends for financial help in purchasing a home last year, according to data from the National Association of Realtors® (NAR).
“Using family as a source of down payment help is most common among younger millennial buyers (ages 20 to 28) compared to other generations, and is more common among unmarried couples,” writes Jessica Lautz, vice president of demographics and behavior insights at NAR. “Both sets of buyers have lower household incomes so may be less likely to scrape together the funds individually.”
But most first-timers (78%) also save money for a home that often gets combined with financial gifts from family and friends, the data shows.
For some adults, family financial help allows them to skip a traditional intermediate step – renting. Many are choosing to live at home and transition directly into homeownership. Nearly one-quarter of first-time buyers move directly from their parents, friends, or family’s home into homeownership, according to NAR. The percentage has grown from 12% in 1993 to 23% in the latest survey.
“This living arrangement provides a number of benefits: Not only can a first-time buyer save for a down payment without the cost of rent, but they can also pay down any debt and get their debt-to-income ratio in check,” Lautz says. “It may also be easier to navigate the tight housing market, as the buyer does not need to line up when a rental lease ends with the timing of purchasing a home. They are free to put down contracts on homes, which they may not get, with less pressure of where they will live if they lose out.”
Source: “Bank of Mom and Dad,” National Association of Realtors® Economists’ Outlook blog (Jan. 28, 2020)
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