A third of first time buyers have been forced to ask their families or friends for financial assistance in order to buy a home, the National Association of Realtors has revealed.
Some
27% of first time buyers surveyed said they’re received a cash gift
from family or friends, NAR data shows.
Jessica
Lautz, vice president of demographics and behavior insights at the
NAR, said that using family to help pay for a down payment was
especially common among millennial buyers (those aged 20 to 28). It’s
also more common among unmarried couples, Lautz said.
“Both
sets of buyers have lower household incomes so may be less likely to
scrape together the funds individually,” she explained.
First
time buyers will also use whatever savings they’ve managed to
accumulate by themselves. The NAR’s data showed that 78% of buyers
used their own savings, often in combination with financial gifts
received from family or friends.
The
benefit of using such financial assistance is that millennials are
able to avoid renting a home. Instead, many move straight from living
at their parent’s homes to owning a home, without ever renting.
Almost 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 now 23%.
“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 said. “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.”
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