Approximately 38% of first-time homebuyers under the age of 30 relied on either a cash gift from family members or inheritance in order to afford a down payment on a new home purchase, illustrating the reliance that younger homebuyers have on family largely in the senior demographic. This is according to new research referenced by Daryl Fairweather, chief economist at Redfin.
According to estimates sourced from the Reverse Mortgage Market Index (RMMI), a joint project between the National Reverse Mortgage Lenders Association (NRMLA) and data analytics firm RiskSpan, seniors at or over the age of 65 currently sit on over $11.6 trillion of home equity as of Q1 2023. This helps illustrate the levels of housing wealth seniors have access to, and adds additional perspective to data gleaned from the Redfin survey.
“It is rare for a young person to be able to afford a home,” Fairweather explained. “Senior Americans (65 and older) are about two times more likely to be homeowners than young Americans (under 35). And oftentimes young people who own their home had help from family. In the Redfin survey, which asked how recent homebuyers accumulated the money for their down payment, 509 respondents were under the age of 30. Among those young homebuyers, 23% used a cash gift from family members and 21% used inheritance money for their down payment.”
The homeownership status of a parent also correlates with the likelihood of a child being able to become a homeowner themselves, according to other cited research by Fairweather.
“Research from economists at The University of Chicago found that children born to homeowner parents are significantly more likely to be homeowners in adulthood,” she wrote. “And according to a 2021 Redfin survey of about 1,500 homeowners, 79% of current homeowners had a parent who owned their home, and 67% had a grandparent who owned a home.”
The time at which homeownership was established by a family also plays into the reality of a divide in ownership levels across demographic lines including race, she added.
“Many young people buying homes today had grandparents who bought homes before the Fair Housing Act was passed, when it was still legal to discriminate against homebuyers on the basis of race, religion, national origin, disability status, or family status,” she said. “And since homeownership persists across generations, the inequities of the past live on.”
Earlier this year, a survey conducted by the Society of Actuaries (SOA) showed that 66% of baby boomers between the ages of 58 and 76 have seen their retirement savings goals impacted by their desire to save and assist grandchildren with large expenses. These include the pursuit of higher education as well as housing.