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The nepo babies of celebrities have been spinning around the internet for more than a year now, but the homebuyer equivalent is also gaining momentum, according to a report from Redfin.
Thirty-six percent of Gen Zers and millennials who plan to buy a home in the near future intend to use a cash gift from their family to contribute to their down payment. That figure is out of 3,000 U.S. homeowners and renters surveyed by Qualtrics in February 2024.
Just five years ago, young homebuyers were half as likely to use family funds for a down payment, Redfin said. In 2019, 18 percent of millennials used cash from family to help finance their down payment, and by 2023, that percentage had increased only to 23 percent. (During those years, Gen Z was not surveyed.)
Cash isn’t the only assistance that younger generations of homebuyers expect to receive from family, however — about 16 percent of Gen Zers and millennials reported that they plan to use an inheritance to help pay for a down payment and 13 percent plan to live with parents or other family members to save money.
Courtesy of Redfin
Saving money from one or two jobs is the most common way that young homebuyers are preparing to save up for a down payment, with 60 percent saying they plan to save from their paychecks and 39 percent saying they will save up with funds from a second job.
Housing affordability challenges have hit today’s younger generations more so than those in the past, with U.S. home prices up almost 40 percent from pre-pandemic years, having surged 7 percent in just the last year. Low inventory, which is contributing to those high prices, also remains a challenge.
On top of those factors, Gen Zers and millennials typically have more student loan debt than their parents did at their age and make lower wages than their parents did, adjusted for inflation. Those young homebuyers who don’t have financial assistance from family, are therefore at a disadvantage when it comes to homebuying.
“Nepo-homebuyers have a growing advantage over first-generation homebuyers,” Redfin Chief Economist Daryl Fairweather said in a statement.
“Because housing costs have soared so much, many young adults with family money get help from mom and dad even when they have jobs and earn a perfectly respectable income,” she continued. “The bigger problem is that young Americans who don’t have family money are often shut out of homeownership. Many of them earn a perfectly good income too, but they aren’t able to afford a home because they’re at a generational disadvantage; they don’t have a pot of family money to dip into. This contributes to wealth inequality and often prevents young people from gaining economic ground on their peers who come from more privileged backgrounds. The American Dream is just as much about class mobility as it is the home with a white-picket fence, and the housing affordability crisis has made both elements of the dream harder to attain.”
Affordability is the biggest barrier to those young Americans who are unlikely to purchase a home soon, Redfin’s survey shows.
At 43 percent, the majority of Gen Zers and millennials reported they’re not likely to buy a home soon because houses on the market are too pricey. About one-third said their difficulty in saving up for a down payment was a barrier to homebuying, while 29 percent each said their inability to afford a mortgage payment and high mortgage rates were barriers.
Courtesy of Redfin
