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Reports Show That More Parents Are Helping Their Millennial Children Buy Their First Homes
As some Millennials get priced out of the current real estate market, their parents are stepping up to provide financial aid.
With Millennials ranging in age from 25 to 40 years old, some media outlets are saying that this generation aged into the housing market at the worst possible time. According to a recent report by the National Association of Realtors, Millennials are eager to become homeowners and currently account for 43% of all homebuyers in 2022 — a number that is expected to grow thanks to the help of sympathetic parents.
During the pandemic, some Millennials were able to use COVID lockdowns to their advantage by moving back in with their parents and saving the money they would have spent on rent. This enabled them to jump into the housing market while prices and mortgage rates were still on the lower side. But this wasn’t possible for everyone. And thanks to mortgage rates rising, skyrocketing rents that inhibit their ability to save, ballooning student debt, and housing prices increasing at unprecedented speeds, some Millennials have simply been priced out of the market.
Being a first-time buyer is hard in the best of circumstances, and it’s particularly tough now for inexperienced homebuyers. It’s almost always easier to buy a new house when you can use the profits from the sale of a former home. But with the current state of the real estate market and rising inflation, many Millennials are seeing their homebuying dreams end before they really have a chance to begin. Even as the housing market shows signs of cooling, most Millennials are still finding themselves stuck behind a rock and a hard place between soaring rents and high mortgage rates.
According to Bloomberg, Millennials are still buying homes but increasingly need help from their parents or other family members to be able to do it. Realtors from all over the country have reported an uptick in parents co-signing mortgages, footing the down payment, or buying the properties outright for their young homebuyers. In a world where rent can be higher than home mortgages, relatives with the means to do so have reported feeling like it’s a waste of money to not help their family members make the leap into homeownership. At least when you pay your home mortgage, you are building equity. Meanwhile, rent is money you will never get back. In addition to being seen as a better investment than paying rent, real estate is also being increasingly viewed as a hedge against inflation.
Similarly, some parents are playing the long game on behalf of their children by buying properties in college towns near the universities their students will be attending. Depending on where your child goes to college, the price of student housing could be the equivalent of a down payment for a home. With this in mind, some parents are just going ahead and buying their children small homes or condos that they can live in during school and after graduation because they feel it’s a better investment. And if the children need to relocate after they graduate, the house can be sold to put the profits toward a new home or rented to current students as an income property.
While it’s unclear just how many Millennials are getting home-buying help from their parents this year, anecdotal evidence shows that the amount has certainly increased from previous years. Even so, Millennial homeownership still trails far behind other generations, helping to show just how grueling the market really is right now. According to an analysis conducted by Apartment List, only 60% of Millennials who have reached age 40 have been able to buy a home. In the past, 64% of Gen Xers and 68% of Baby Boomers were homeowners at age 40. As the market does show signs of cooling, it will be interesting to see if Millennials continue to need financial aid or if they will regain the ability to navigate the journey to homeownership on their own.
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