A recent report by Redfin sheds light on the growing wealth gap in homeownership, revealing that over 36% of young homebuyers now expect cash gifts from family to afford a down payment. This marks a significant increase from 2019 when only 18% of millennials received similar assistance.
According to Redfin's chief economist Daryl Fairweather, this trend underscores the advantage nepo-homebuyers have over first-generation buyers. "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," Fairweather stated.
While family assistance is on the rise, the primary source of funding for young buyers remains their own income. Saving from paychecks (60%) and working second jobs (39%) are cited as the most common means of accumulating funds for down payments.
Affordability Challenges
Soaring home prices, up nearly 40% since the pandemic, coupled with a shortage of available homes, make it increasingly difficult for young people to save enough for a down payment.
"In many ways, Gen Zers and millennials face a more difficult financial landscape than their parents did at the same age," Redfin noted in the report. "Their wages are lower, they have more student loan debt, and inflation has pushed up the cost of nearly everything, including housing."
Among the barriers to homeownership cited by those unlikely to purchase a home soon, 43% point to high housing costs, followed by the inability to save for a down payment (34%), struggles to afford mortgage payments (29%), and elevated mortgage rates (29%).
Long-term Impact
Fairweather warned that this reliance on family aid exacerbates wealth inequality, as young buyers with family assistance gain a significant advantage over those without it. "The bigger problem is that young Americans who don’t have family money are often shut out of homeownership," Fairweather explained. "This contributes to wealth inequality and often prevents young people from gaining economic ground on their peers from more privileged backgrounds."
The report emphasizes that the American Dream of homeownership and economic mobility is increasingly challenging for younger generations, highlighting the urgent need for solutions to address the housing affordability crisis.