More than one-third of Gen Z and millennial homebuyers need financial help from their parents for a downpayment to land their first pad amid skyrocketing housing prices across the country, according to a recent survey.
Dubbed “nepo” buyers — a reference to the “nepo baby” phenomenon where children of celebrities ride their coattails to gain a foothold on a career — a growing number in these younger generations have found the housing market increasingly unaffordable as so-called $300,000 “starter homes” have become a thing of the past.
“Nepo-homebuyers have a growing advantage over first-generation homebuyers,” said Redfin Chief Economist Daryl Fairweather, whose real estate firm surveyed 3,000 US homeowners and renters.
“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.”
Redfin found that 36% of Gen Zers, whose ages range between 12 and 27, and millennials, 28 to 43, are expecting a cash gift from family members in order to fund their downpayment — twice as many as there were just five years ago.
Another 16% are anticipating to use an inheritance to help fund their downpayment, and 13% plan to live with their parents or other family members, according to Redfin’s report that was earlier reported on by Fortune.
“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,” Fairweather added.
Nearly half, 43%, of Gen Zers and millennials told Redfin that they’re unlikely to purchase a home anytime soon because they’re being priced out of the market.
Some 34% cited an inability to save for a downpayment as why they’re not looking to buy a home, while the next common responses when asked why Americans aren’t likely to buy a home were the ability to afford a mortgage payment and high interest rates.
Current mortgage rates hover at around 7%, around double what they were when President Biden took office.
Of the Gen Zers and millennials who aren’t planning to buy a home in the near future, 16% cited lack of financial support from family or friends as a reason, Redfin found.
Last month, the average sale price of the 662,000 new homes sold across the country was a staggering $485,000, according to the US Census Bureau.
Pre-COVID, in February 2019, that figure was roughly 35% less — $315,300, the Census reported.
The supply of homes also remains below the historical average. At the end of last month, there were 1.07 million unsold homes on the market, a 5.9% increase from January and up 10.3% from a year earlier.
That’s the highest inventory of homes for sale for February since 2020, the National Association of Realtors said last week.
The ability to save up for a home also has been stifled by inflation amid the Federal Reserve’s battle to bring it down to its 2% target
According to the latest Consumer Price Index, which tracks changes in the costs of everyday goods and services, US inflation rose 3.2% in February.
The Fed interest rate has remained elevated at its current 22-year high, between 5.25% and 5.5%, with expectations they may finally get cut when the central bankers meet in June.
[Notigroup Newsroom in collaboration with other media outlets, with information from the following sources]
