Real Estate Marketing & Beyond
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.”
