"Nepo-homebuyers": 38% of young buyers use family money for down payments
axios.com
axios.com
Is this really a “previous generation” thing?
And past generations before also experienced very HIGH interest rates as well as low.
(I will add that we got some money from my mother-in-law to get up to a 10% down payment. Less than $10K, I think.)
How much was the house and how much do they sell for in your area now ?(approximately)
We bought within a year of the market peak, and it was ten or more years before the prices returned to what they had been. At one point early in those years, my sister-in-law, in for a visit, remarked that a lot of the for-sale signs looked familiar from her previous visit. (Around a year.)
the problem is inflated asset prices combined with low wage growth combined with high interest rates. now i have some avocado on toast to finish
Plus dropping interest rates also does cause economies to overheat so there is job creation.
The article doesn't really say.
When I bought a home I had a family member help out while I was selling my previous home. This wasn't difficult nor did it seem strange to anyone involved as far as the financing went.
I suspect a good chunk of purchases are this way in one form or another.
Mar 12, 2019 — New data from financial services company Legal & General finds that 43 percent of homeowners age 34 and younger got money from family or friends
May 7, 2019 — The share of homebuyers who used a gift or loan from family and friends has been constant since 2013 at nearly 25%.
https://www.freddiemac.com/research/insight/20190507-the-dream-of-homeownershipThe same older people complain their children or grandchildren can't afford to live near them. But the moment someone tries to build more houses or apartments in the area they'll be submitting objections to the local council because it will affect their property value.
The government did a "help to buy" scheme but that just made it all worse. Because the higher the price the more they paid (up to a certain limit). So you'd have people who can afford more getting paid more from the scheme.. and getting help from parents.
So if two of these people start bidding on a house they can both now afford to bid higher against each other. Pushing prices up at the expense of tax payers.
And then just to make all worse a huge number of properties being taken off the market to be used as Airbnb's. Forcing the government to utilize hotels to house refugees and the homeless. Which is then creating a need to build more hotels and push up the prices of airbnbs..
We're in some weird feedback loop.
https://www.irishtimes.com/business/construction/over-700-ob...
Edit: Not a taxman. Just trying to remember what ours told us. Better info in the following post.
You can also gift up to 5 years' worth at once, with some paperwork needed.
Gifts received are always non-taxable to the recipient. The gift tax (when required) is first a reduction of estate tax exclusion of the donor, nothing for the recipient of a bonafide gift to do tax-wise.
Mobility is linked to previous generations more than your own. Wealth is more important than income because there are so few jobs that can actually build enough wealth to own a home.
Assume you will spend 20 years to pay off the debt with 20% Down Payment. That means each month you will spend 80%/240 -> 0.3% of the house value each month. Including interest rate that's 0.4 - 0.5%.
So w/ down payment helps you can save up to 40-50 monthly payment.
For people living in an expensive apartment, they might be barely making rent. Whereas they could obviously afford a mortgage for a similar monthly amount - but since they're living paycheck-to-paycheck they can't save the prodigious 20%. So they're stuck.
Of course perhaps some people have a nest-egg from a windfall or inheritance but then couldn't handle the monthly payment.
The main barrier these days to putting less down is twofold - one, you need to pay PMI which is just compounding the monthly payment problem. Two, good fricking luck getting your offer accepted with <20% down in these times. Sellers read into offers more than just "is this financed y/n" and there's IMMENSE preference for buyers who can put 20% down, because it signals that a) if necessary they could pay PMI and drop down the up-front % in order to close on a contract, and b) they probably have more cash than just that 20% and are only stopping at 20% because it is customary and they could weather unforeseen issues more easily.
To put it in anecdote form: I sold my house in 2020. We had 8 offers presented to us after 1 day on the market. All were for 20% down because my agent didn't even hear offers from people with less down, since we had so many at 20%. In mid-2023, my brother bought a house in a similar sort of area (metro area of a major-for-the-midwest city). 2 days on the market, he was one of 3 offers, all for 20% down and about 50k over asking (the house was priced somewhat low as a marketing strategy, but I'm guessing based on comps they still had to go in about 10k over a non-meme version of the list price). He wouldn't have even been in the running if he didn't have 20% down. And he also had to waive all contingencies which almost made his financing fall through/be late due to something stupid a random inspector said.
It's tough out there. Even if you can nominally "afford" a house, it can be hard to actually close on one in the open market without someone more financially established who is able to backstop you in various ways.
We would not have been able to afford a mortgage there because the only available housing stock requires too much work and $$$ to be worth it. We only bought this house because it was a fair price and all the HVAC was new. Nothing else in our market was acceptable at the time.
So basically, down payment is easy, monthly mortgage is ok, but any contracting work is a painful hemorrhage.
Basically, I suspect that today a larger share of homes are owned by the older generations, making it more and more difficult over time for young families to find houses to buy. A crude way to phrase this would be that the older generations are hoarding all the housing supply. The older generations are increasing in numbers and financial means, and the housing supply is not increasing fast enough to give the younger generations the same opportunities to buy.
The end result of this seems to be a massive wealth shift to the older generations, leaving the current younger generations less well-off than their parents were at the same age. This seems to be the opposite of what you want to see in a well functioning society.
As I suspected, we can see a big shift comparing 1993 to 2019.
Share of Homes Owned by Age
1993:
<35: - 14.9%
35-44 - 23.2%
45-54 - 20.2%
55-64 - 15.9%
65+ - 25.7%
2019:
<35 - 9.8% (-5.1)
35-44 - 15.7% (-7.5)
45-54 - 19.0% (-1.2)
55-64 - 23.4% (+7.5)
65+ - 32.1% (+6.4)Over the next 2 decades, almost all of that 32.1% supply in the 65+ group will become available.
Be curious to know "how much" money was given. I think our family gave us $5K or so. I assume some people get much more and some get 0. My sister was given a 0 interest loan from my parents, maybe around $50K or so.
I went through high school, and things seemed to slowly be ‘getting worse’. Then I studied finance in college and realized Greenspan’s ‘New Paradigm’, followed by QE (Keynesian, centrally planned, interventionist low-interest rate regimes) were making a prophet out of Hayek and his ‘Road to Serfdom’. It’s a complaint about financial policies that have kneecapped, and are further destroying, the American ideal of economic self determination.
its a plus for the neighborhoods these people buy into as well - buyers from good supporting families are probably going to be good neighbors too
parents will be more flexible, sympathetic, and less greedy than a bank, and they can feel good about being there for their kids
everyone wins
but even then, my tax dollars pay for public education, infrastructure, public college, roads, etc etc ....I am most definitely subsidizing opportunity for others
They're saying its a problem for social mobility when "how much money your parents have" becomes a gatekeeper to homeownership.
There’s a lot of variables at play on house prices: desirability, location, space, build cost
What legislation can make housing more affordable ?
yes, and I pay six figures in tax every year so there is plenty enough from me in the community pot for you to achieve this
if you instead send the money to Ukraine, thats your choice
As a member of society, however, your obligation is to other members of society.
I'm not going to argue that you're not doing that. I do think tax rates are too low on the top 10% in the US, assuming that's where you're from (seems safe) -- but the biggest shortfall is surely on the top 0.1%.
The reality is, opportunity for others is objectively declining.
Inheritance is a thing and always was.
Many millennials currently find themselves in this position, myself included. I'm better educated than my parents (by qualification), and I earn more than them, but they own properties and cars and go on holidays frequently, because they bought houses at the right time and earned more proportionally to their costs earlier in life. I'm still very much in the same socio-economic range as my parents are now, they did the moving earlier in their lives, I'm unlikely to be able to move.
Average home price in America is over $400,000 which means a 20% down payment is $80,000.
People just starting out aren't usually aiming for the average home. There are lots of homes and condos that are half that price - depending on location.
>> which means a 20% down payment is $80,000.
If you are faced with this situation, an FHA loan requires 3.5% down and you can buy with a sub-600 credit score. FHA loans are designed for first-time buyers.
Also, parents giving you money has zero correlation with your "good, supporting family" statement. Don't draw a comparison of two completely unrelated things.
"Everyone wins", yeah expect for the people who's parents don't have a spare $60,000 to give their kids for a down payment on a home.
my bank deposits are available to be reloaned out to people who don't have a family resource
there is no real injustice here, we all contribute to collective support in many ways, from taxes to loan assistance to education and infrastructure that elevates all and provides opportunity for all
you will always have some people who have an advantage others don't, that's life
How is that possible for there to be zero correlation?
It seems like there's an incredibly strong bi-directional correlation between "my family is supportive to me" and "my family sometimes gives me money".
Family dynamics and wealth aren't tied by any connecting factors. Being born into a wealthy family doesn't give you a higher chance of having a good, supportive family. Just as the opposite statement of being born into a poor family means you'll have a bad, unsupportive family.
if my kids screw it up then I would lose not only my own wealth but their inheritance...so there is still risk even to the beneficiaries of nepotism
I have zero qualms with people putting family first
Thankfully my wife and I make good income and have been saving, but the treadmill doesn't work for everyone.
except those without rich parents
and kids whose parents never cared if they did dumb or illegal things
etc etc
we don't live in a world of equal outcomes and never will
I mean...you were born in the West instead of being born in a hopeless place like Gaza...how unfair!