With younger buyers increasingly finding themselves locked out of the real estate market by rising prices that make it difficult to save for a down payment, many are turning to mom and dad.
New data from the Federal Reserve Board’s 2014 Survey of Household Economics and Decision-making shows that the use of gifts or loans from parents and friends increased dramatically following 2008's recession. While family and friends helped 8 percent of first-time buyers to snap up homes in 2008, that figure rose to 21 percent of all first-time buyer homes purchased in 2009, the survey found.
Since then the incidence of family/friend loans and gifts has only increased further, with 27 percent of first-time buyers purchasing their homes in this way, according to National Association of Realtors' statistics.
Family and friend's loans and gifts have become increasingly critical for first-time buyers looking to get into the real estate market, the study shows. It says the situation is exacerbated by the difficulty in obtaining credit these days, and high rents and student loan debts that make it difficult for people to save for a down payment.
Zillow carried out its own analysis on the study, finding that the number of first-time buyers seeking assistance from family and friends to buy a home has doubled since the recession. While just 11 percent of buyers in the category sought out assistance from people in their social networks pre-recession, over 22 percent did so post-recession.
The study found that middle-income households, Asians and Hispanics were the most likely demographics to receive down payment assistance.
Source: RIS Media