First time buyers are increasingly turning to the Mom and Dad bank to help fund their home purchases.
Twenty-seven percent of first time buyers last year received a cash gift from relatives or friends for a down payment, according to the National Association of REALTORS®. That’s up from 24 percent in 2014, and it also marks the highest share since NAR began tracking such data in 2009.
Young professionals are facing high student-loan debt, a constrained job market, and stricter mortgage lending rules that are requiring higher down payments. Meanwhile, baby boomer parents are seeing rising stock and property values that may make them more inclined to help their children break into home ownership, particularly while mortgage rates are hovering near record lows, The Boston Globe reports.
“Without them, the [housing] recovery’s not sustainable,” says Anika Khan, a senior economist at Wells Fargo Securities. Parents’ financial assistance will help “move the housing recovery along.”
Deborah Baisden, a real estate professional with Prudential Towne Realty in Virginia Beach, Va., says she’s finding that more and more parents are gifting money.
“Because of student debt and because of kids having a tough time finding jobs, it’s becoming increasingly difficult for them to be able to buy homes,” Baisden told The Boston Globe. “We’re turning into a country of renters.”
Indeed, the struggle to come up with a down payment has been the top reason young professionals cite for why they’re renting rather than buying, according to a Federal Reserve report on the economic well-being of households.
Parental purse strings are opening at the right time, housing analysts say, with mortgage rates still low and investors retreating from the market, which may provide a greater opening to first time buyers. Investors tend to snatch up lower-priced properties with all-cash offers.
“With the investors stepping away, for some first-time buyers and Millennial buyers, they have less competition,” says Lawrence Yun, NAR’s chief economist. “So it would be an opportune time to enter the market.”
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Source: BostonGlobe.com 09/22/2014