Nepo-Homebuyers: More Than One-Third of Gen Z and Millennial Homebuyers Plan to Use Family Money For Down Payment

Rhea-AI Summary

Young Americans increasingly rely on family help for home down payments as housing costs surge. A Redfin report shows Gen Zers and millennials receive cash gifts, inheritances, and live with family to afford down payments. Working and saving remain common methods. The trend of using family money for down payments has doubled in recent years due to soaring home prices. Financial challenges like lower wages, student debt, and inflation make homeownership difficult for young adults without family support.

Insights

Economist

The trend of young Americans relying on family assistance for home down payments is indicative of broader economic challenges. Housing affordability has become a significant issue, particularly for Gen Zers and millennials. This demographic is grappling with a stagnation in real wage growth relative to the cost of living, exacerbated by student debt and inflation. The reliance on family wealth for property acquisition not only reflects the stratification of economic opportunity but also raises concerns about the perpetuation of wealth inequality.

From an economic perspective, this shift could lead to a reinforcement of existing wealth disparities, as those without familial financial support may find it increasingly difficult to enter the housing market. This could, in turn, affect future consumer spending patterns and savings rates among young adults. The long-term implications may include a delay in wealth accumulation for a significant portion of the population, potentially impacting their financial stability and the broader economy.

Market Research Analyst

The data presented suggests a change in the dynamics of the housing market. The increase in young homebuyers relying on family support, from 18% in 2019 to 36% recently, points to a market shift where familial wealth plays a more significant role in home purchasing. This could influence the real estate market, potentially leading to increased demand for homes in certain price brackets or areas that are perceived as more family-friendly investments.

Additionally, this trend may have implications for the types of services and products that real estate companies and financial institutions offer. We might see an uptick in products tailored to multi-generational financial planning or down payment assistance programs that cater to those without access to family funds. Understanding these market shifts is important for businesses operating within the real estate and financial sectors to stay competitive and address the evolving needs of homebuyers.

Social Scientist

The reliance on family for financial assistance in home purchasing is not just an economic issue but also a social phenomenon. It underscores the changing landscape of family dynamics and intergenerational wealth transfer. This trend may lead to a deeper investigation into the social fabric of American society, where family support systems become integral to achieving certain milestones, such as homeownership, which has traditionally been seen as a marker of individual success.

The term 'nepo-homebuyers' coined by Redfin's Chief Economist captures the essence of this social shift. It suggests that social capital—the networks and relationships that can be converted into economic gain—is becoming as significant as financial capital. The impact on social mobility and the concept of the American Dream, where success is ostensibly attainable through individual effort, is profound. This phenomenon warrants further research into its long-term effects on societal values and aspirations.

Young Americans who have the means are turning to family for help with down payments as housing costs soar.

SEATTLE--(BUSINESS WIRE)-- (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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240327295586/en/

Redfin Journalist Services:

Kenneth Applewhaite, 206-414-8880

press@redfin.com

Source: Redfin

FAQ

How are young Americans funding their home down payments according to the Redfin report?

Young Americans are receiving cash gifts, inheritances, and living with family to afford down payments. Working and saving from paychecks are common methods.

What percentage of Gen Zers and millennials expect to receive a cash gift from family for their down payment?

36% of Gen Zers and millennials plan to receive a cash gift from family to help fund their down payment.

What is the most common way for young buyers to fund their down payments according to the Redfin report?

Working to earn money, saving directly from paychecks, and working a second job are common ways for young buyers to fund down payments.

Why are young Americans increasingly turning to family for help with down payments?

Young Americans are facing higher home prices, lower wages, more student loan debt, and inflation, making it difficult to afford homes without family assistance.

How has the trend of using family money for down payments changed in recent years?

The trend has doubled in recent years, with 36% of young homebuyers planning to use family money compared to 18% in 2019.