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"Nepo-homebuyers": 38% of young buyers use family money for down payments
- morkalork 3y agoAnd in Canada another 30% (or less with overlap) of home purchases are by investors and not primary owners. Hooray!
- bryanlarsen 3y ago36% of Canadians are renters. The people they rent from are called investors. Fewer investors would mean higher rent.
- djohnston 3y agoIf they were replaced with homeowners in their primary residence it wouldn't matter. By your logic rent would be lowest of there were no homeowners except for investors.
- deleted 3y ago[deleted]
- throwawaymaths 3y agoConsidering that the previous generation benefitted greatly because of low interest rates (esp. e.g. being able to buy a second home at the same monthly payment due to rate halfings), and those low rates drive up the cost of housing, having the previous generation finance this generations house kinda makes sense, even if its not "fair" for everybody.
- camillomiller 3y agoI wish my own previous generation did that too.
- duxup 3y agoLow interest rates pretty much existed until very recently. Is this really a “previous generation” thing? And past generations before also experienced very HIGH interest rates as well as low.
- mminer237 3y agoInterestingly, when you compare housing prices, interest rates, and inflation, current housing prices are very similar to what they were in the '80s if you're borrowing: https://matthewminer.name/data/median-mortgage-payments/ https://matthewminer.name/data/median-mortgage-payments/
- dahart 3y agoYep it’s been very low since 2010, but looks like it’s been above 5% for possibly more than half the time since 1954, and there was a long stretch from around 1978-1991 where 6% was the minimum, and brief periods where it got to almost 20%. I feel for the poor people who bought houses with an 18% interest rate, I hope every single one refinanced quickly… https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS
- dhdudbd 3y ago[flagged]
- cafard 3y ago>> a violation of human rights In general, hospitals do want parents to take their offspring home from the nursery after a day or two.
- dhdudbd 3y ago[flagged]
- JumpCrisscross 3y ago> it's a violation of human rights. people receiving shelter based on who gave birth to them This hyperbole kills reasonable discussion. Right to shelter != right to own property, and any property at that.
- dhdudbd 3y ago[flagged]
- JumpCrisscross 3y ago> people should live in their tents and be happy. got it. Again, hyperbole. Plenty of countries have housing models that preclude private ownership. They're still fulfilling their obligation to shelter. Most Americans do not face a lack of shelter, certainly not those considering purchasing a house. Housing cost is a serious issue in our cities. But it's not at the level of violating human rights, not by a long shot.
- cafard 3y agoThe previous generation? My recollection is that our first mortgage 30+ years ago was around 6%, ARM. That is somewhat lower than it is now, but not lower than the last several years. (I will add that we got some money from my mother-in-law to get up to a 10% down payment. Less than $10K, I think.)
- lawlessone 3y ago>was around 6%, How much was the house and how much do they sell for in your area now ?(approximately)
- cafard 3y agoAbout $180 K, now about $500 K. We bought within a year of the market peak, and it was ten or more years before the prices returned to what they had been. At one point early in those years, my sister-in-law, in for a visit, remarked that a lot of the for-sale signs looked familiar from her previous visit. (Around a year.)
- ofjcihen 3y ago“6% of what” is where the answer lies.
- dhdudbd 3y agoyeah? you take out a loan for a toothpick and a couple of dimes at 6% APR? the problem is inflated asset prices combined with low wage growth combined with high interest rates. now i have some avocado on toast to finish
- throwawaymaths 3y agoIn the 80s it was 12%, 90s 6%, then in the 20-somethings 3% Plus dropping interest rates also does cause economies to overheat so there is job creation.
- tootie 3y agoMy parents bough in the 70s and their mortgage rate was like 10%. The super low rates era was much more recent and brief.
- oldpersonintx 3y agothere is no problem here, this is exactly what family is - people who will be there for you when no one else will its a plus for the neighborhoods these people buy into as well - buyers from good supporting families are probably going to be good neighbors too parents will be more flexible, sympathetic, and less greedy than a bank, and they can feel good about being there for their kids everyone wins
- danpalmer 3y agoIt's a significant damper on social mobility, which is generally tied to many positive aspects of society.
- oldpersonintx 3y agoas a parent, my obligation is to my family, not someone else's but even then, my tax dollars pay for public education, infrastructure, public college, roads, etc etc ....I am most definitely subsidizing opportunity for others
- mistrial9 3y agoyou are generating pride by doing something for your own family.. but it is stated in the general case, not the personal case. Public policy is tricky that way.
- woooooo 3y agoNobody's arguing against that or telling you what to do with your money. They're saying its a problem for social mobility when "how much money your parents have" becomes a gatekeeper to homeownership.
- oldpersonintx 3y agowell I'm sorry but what are you going to do about it? you don't know where people get their down payments...if you are really dogmatic about this, you end up with 100% mandatory public housing
- userinanother 3y agoI’m already thinking about this as our next big expense after college. It’s no secret wealthy parent often buy their kids houses or apartments next to the university if they can afford it as well that’s been happening for ages
- duxup 3y agoIs that more than in the past? The article doesn't really say. When I bought a home I had a family member help out while I was selling my previous home. This wasn't difficult nor did it seem strange to anyone involved as far as the financing went. I suspect a good chunk of purchases are this way in one form or another.
- blakesterz 3y agoExactly what I wondered... Mar 12, 2019 — New data from financial services company Legal & General finds that 43 percent of homeowners age 34 and younger got money from family or friends That one is from CNBC, and that same year freddiemac said: May 7, 2019 — The share of homebuyers who used a gift or loan from family and friends has been constant since 2013 at nearly 25%. https://www.freddiemac.com/research/insight/20190507-the-dream-of-homeownership
- francisofascii 3y ago> Among those young homebuyers, 23% used a cash gift from family members and 21% used inheritance money for their down payment. Be curious to know "how much" money was given. I think our family gave us $5K or so. I assume some people get much more and some get 0. My sister was given a 0 interest loan from my parents, maybe around $50K or so.
- hammock 3y agoI hear about help getting down payments and people buying with <20% down payments etc all the time.. but as a non-trustafarian, financially literate person with a normal non-tech job.. the down payment seems to be the easiest part. The monthly payment and interest expense is the hardest one (especially since it means committing to maintaining your career or better for the next 30 years, or otherwise hoping there isn't a housing downturn). Can anyone explain the perspective I'm missing?
- dasil003 3y agoYou’re likely an exceptional saver by American standards.
- hammock 3y ago10% of pre-tax income, not including retirement savings is exceptional?
- justsocrateasin 3y ago... yes, that's exceptional. The majority of Americans do not save much at all - https://www.cnbc.com/2023/02/10/average-amount-of-money-americans-saved-in-2022.html#:~:text=Here's%20how%20much%20money%20Americans%20saved%20at%20every%20age%20in%202022,-Published%20Fri%2C%20Feb&text=In%202022%2C%20Americans%20reported%20saving,by%20New%20York%20Life%20found https://www.cnbc.com/2023/02/10/average-amount-of-money-amer....
- mminer237 3y agoThe average rate is 3.9%: https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT
- eunos 3y ago> the down payment seems to be the easiest part Assume you will spend 20 years to pay off the debt with 20% Down Payment. That means each month you will spend 80%/240 -> 0.3% of the house value each month. Including interest rate that's 0.4 - 0.5%. So w/ down payment helps you can save up to 40-50 monthly payment.
- networkchad 3y ago[dead]
- Supermancho 3y agoMy wife and I aren't young (over 40), but we borrowed 35k for our 7% down at the bottom of the interest rates. We got way too much house, but got almost everything we wanted. As a married couple, if you stay under a ~40k gift, you can tell the IRS to write it off as 2 gifts (separate transfers for the balance of the difference <5k) and pay no income tax on it. Edit: Not a taxman. Just trying to remember what ours told us. Better info in the following post.
- sokoloff 3y agoThe gift limit is $17K ($18K next year) per recipient for a donor. This means that a couple can gift another couple $68K in a year without triggering any reporting requirements. (Each member of gifting couple can gift $17K to each member of the receiving couple.) You can also gift up to 5 years' worth at once, with some paperwork needed. Gifts received are always non-taxable to the recipient. The gift tax (when required) is first a reduction of estate tax exclusion of the donor, nothing for the recipient of a bonafide gift to do tax-wise.
- boppo1 3y agoJealous people will downvote you, but I commend you for sharing the tip, even if I’m in no position to employ it.
- watwut 3y agoLike, of course? If I can afford it I am going to help my kids too. My parents helped me for the start too (tho not to buy house, they could not afford that).
- boppo1 3y agoSee my comment history for my previous post. The problem isn’t familial help, it’s the policies that made it necessary.
- cmrdporcupine 3y agoSlow crawl to feudalism.
- mycentstoo 3y agoSeems like we’re recreating the Middle Ages financially a bit here doesn’t it? Mobility is linked to previous generations more than your own. Wealth is more important than income because there are so few jobs that can actually build enough wealth to own a home.
- deleted 3y ago[deleted]
- rs999gti 3y agoAnd, is there anything wrong with this? Parents are supposed to help their children.
- boppo1 3y agoI think it’s bemoaning that it’s necessary, not the actions of the privileged. As a child of the 90s, I grew up with the idea of ‘work hard and you can earn enough wealth to be independent.’ My parents did so fairly easily and planned for a world where I could do the same. The don’t expect any retirement support from me, but also cannot afford to help me get on my feet. I went through high school, and things seemed to slowly be ‘getting worse’. Then I studied finance in college and realized Greenspan’s ‘New Paradigm’, followed by QE (Keynesian, centrally planned, interventionist low-interest rate regimes) were making a prophet out of Hayek and his ‘Road to Serfdom’. It’s a complaint about financial policies that have kneecapped, and are further destroying, the American ideal of economic self determination.
- djohnston 3y agoMeanwhile I'm here paying 1/2 of my mom's mortage to keep the family home. Of all the boomers why did I get stuck with bums? Smdh
- lawlessone 3y agoNot in the US but have the same issue where i am. And because prices don't seem to affect supply, everyone getting money from parents is just pushing up the prices for each other. The government doesn't do much about it because many of them own property or own multiple properties acting as landlords.. and older people with property still vote more. The same older people complain their children or grandchildren can't afford to live near them. But the moment someone tries to build more houses or apartments in the area they'll be submitting objections to the local council because it will affect their property value. The government did a "help to buy" scheme but that just made it all worse. Because the higher the price the more they paid (up to a certain limit). So you'd have people who can afford more getting paid more from the scheme.. and getting help from parents. So if two of these people start bidding on a house they can both now afford to bid higher against each other. Pushing prices up at the expense of tax payers. And then just to make all worse a huge number of properties being taken off the market to be used as Airbnb's. Forcing the government to utilize hotels to house refugees and the homeless. Which is then creating a need to build more hotels and push up the prices of airbnbs.. We're in some weird feedback loop.
- JumpCrisscross 3y agoDid you grow up in Cupertino by chance?
- lawlessone 3y agoNo but i can see the parrallels https://www.irishtimes.com/business/construction/over-700-objections-lodged-against-466m-dundrum-apartment-concrete-jungle-1.4887325 https://www.irishtimes.com/business/construction/over-700-ob...
- zeroonetwothree 3y ago38% doesn’t seem very high. I wonder what it was in the past? Parents have always helped their children it’s not like this is some new trend. Without any historical saga this article is pointless.
- spaceywilly 3y agoSomething I am curious to see is the "share of housing inventory owned by each age group" over the years. For example, "25% of housing is owned by people over 75 years old, 50% 55-75, 25% under 55", etc. broken down for each year. Basically, I suspect that today a larger share of homes are owned by the older generations, making it more and more difficult over time for young families to find houses to buy. A crude way to phrase this would be that the older generations are hoarding all the housing supply. The older generations are increasing in numbers and financial means, and the housing supply is not increasing fast enough to give the younger generations the same opportunities to buy. The end result of this seems to be a massive wealth shift to the older generations, leaving the current younger generations less well-off than their parents were at the same age. This seems to be the opposite of what you want to see in a well functioning society.
- woleium 3y agoWell, there are a lot more of them than there used to be.
- spaceywilly 3y agoI did find something here: https://ipropertymanagement.com/research/homeownership-rate-by-age#analysis https://ipropertymanagement.com/research/homeownership-rate-... As I suspected, we can see a big shift comparing 1993 to 2019. Share of Homes Owned by Age 1993: <35: - 14.9% 35-44 - 23.2% 45-54 - 20.2% 55-64 - 15.9% 65+ - 25.7% 2019: <35 - 9.8% (-5.1) 35-44 - 15.7% (-7.5) 45-54 - 19.0% (-1.2) 55-64 - 23.4% (+7.5) 65+ - 32.1% (+6.4)
- SaintGhurka 3y agoThat shows a bit of a pig-in-the-python situation where you can see the 2 biggest groups today are just 2 large group from 30 years ago moving through life. Over the next 2 decades, almost all of that 32.1% supply in the 65+ group will become available.
- userinanother 3y agoBuying your home and car is tax advantaged. Because you pay for your house and car with post tax money the equivalent stock or bond investment would need to yield 25-30% more to be the same roi. That can be a big deal over time