Welcome to the 'nepo' housing market: 40% of homebuyers under 30 get family money to cover their down payment
Welcome to the 'nepo' housing market: 40% of homebuyers under 30 get family money to cover their down payment
I don't get it.
I understand the current housing market is messed up, but parents helping their kids putting a down payment for their house is dystopic "nepotism" now? Wouldn't you help your loved ones if you have the means to do so even if you are not super rich?
Would it have been better if they told their kids to pick themselves up by their own bootstrap and get a 30 year loan from big banks instead?
You said that you don't get it. The point isn't that people are evil for helping their kids, the point is if the housing market is running on the assumption that houses are worth what a family plus their parents will pay for them, regular families won't be able to afford houses. If everyone agreed that regular young families should be able to afford a house and didn't rely on older mom and dad for money, houses would be more affordable for everyone.
I couldn't read the article because of the pay wall, but did they say what the 40% is an increase from? I know I got some help from my parents on a down payment in 1995, and it wasn't super unusual then.
A problem I've seen is that since the 90s there has been a progression from small, affordable ranch houses and such to minimansions. Homes have simply gotten bigger. One thing driving it has been the double income household, not only has this driven up prices since the homes simply cost more to make but with two people paying the mortgage you are now in a situation where if one person loses their income you can't cover for them. If it was a single income household and, say, you got disabled the other person could possibly cover for you.
only rich kids being able to afford houses is dystopic
Ok, if you are a middle class parent with a little bit of savings, and one of your child wants to buy a house, wouldn't you do everything you can with your money to help them too?
You don't have to be rich to want the best for your kids, and I really hate the selfish boomer mentalities of "oh I have it hard back in my day, so I'm not going to help my kids with anything to teach them a lesson about life." It's fucked up.
I believe the point is that people need nepotism to afford a house
Calling it "nepotism" is really weird. It's just family lending money to their kids.
Nepotism would be more like your parents owned a second home with renters living there, then you kicked the renters out because of your family connection just to live there rent free.
The dystopic aspect isn't the individuals. It's the system that requires it.
Let me get this straight. 4 generations living under the same roof is traditional, but helping your kids buy a house is dystopian?
Is this just coming from the “money is a crime” crowd?
helping your kids buy a house is dystopian?
It's dystopian when the only way to own a house is to be born into wealth. And we aren't there yet but that's where we are headed based on the stats.
Nepotism is a highly searched word at the moment for a number of reasons. They're hoping to game the SEO off the word and make their article more visible.
Wouldn't you help your loved ones if you have the means to do so even if you are not super rich?
Counter-point, I'm gay.
I hate this term ... giving your kids money to help them start out on their own isn't nepotism, it's parenting.
Nepotism is when you violate a responsibility you have to a third party (e.g., your employer) to act impartially in their interests, in order to benefit your family.
Is the idea that parents should donate their money equally to everyone's kids? This makes no sense.
I agree it isn't nepotism. But I think the societal expectation that parents have to help their children is a the same systemic oppression with a new face. This only applies to the well-to-do, who buy into capitalism. Give up their lives to the machine.
This power sincerely complicates coming out of the closet, dating and marrying for love, social expressions like tattoos, life choices like art instead of business. This gives us another reason to second guess whether we ought to live life for ourselves or to please our parents.
I mean, it's a bit tough for me to see it that way. Having wealthy parents who can use the leg up they intend to give you in life as a way of manipulating you into doing and being what they want, and that's gotta suck.
At the same time, you can cut ties with them and you end up in the same position a lot of us start in: having to do it on your own. You've got a choice that other people don't, it's difficult for me to see that as a disadvantage.
Better to reign in hell than serve in heaven. The moment my parents played games with who I was going to be or they would cut me off I left them. I would pick homelessness again than give them an inch. They can go cry to their bff supply side jesus
My parents don't agree. It all up to us. It sucks.
It should definitely not be called nepotism at the individual level, but if you agree with the core premises that working should be able to grant you enough money to buy your own house, it could be argued that it is a societal kind of nepotism in that the family you have determines your most basic opportunities in life.
giving your kids money to help them start out on their own isn’t nepotism, it’s parenting.
You can just say your parents gave you an entire apartment building when you turned 18.
Is the idea that parents should donate their money equally to everyone’s kids? This makes no sense.
The idea is that Karen doesn't get veto power over construction and we have enough housing for all.
You can just say your parents gave you an entire apartment building when you turned 18.
I moved out and went no contact with my parents on my 17th birthday... but I would love to be able to give my kids the kind of help my parents didn't give me.
The idea is that Karen doesn't get veto power over construction and we have enough housing for all.
That's a very good idea, it's what I've been harping about in my other comments. You don't fix this issue by demonizing people for buying houses, you identify the reason there aren't enough houses in the first place and go after that.
San Francisco allowing property owners (whose houses have skyrocketed in value) to block any kind of dense housing being built is the reason SF is so utterly fucked.
You don't even need to have super rich parents. My mother helped me get my first home with 15K that she saved throughout the years. (I paid her back).
That was just enough for my down payment. Without that I couldn't have gotten the house.
I think the issue is what if you have no parents or parents with no money (or negative moneys). You could do everything right, go to school, get a professional job, and still not be able to buy a place.
The housing market is definitely fucked worldwide. Many don't have parents with money and can only rent or not even move out of their parents house.
Some of us got lucky with minimal down payment from their parents 5-10 years ago. Its just ridiculous how the market changed in such a small time. Like the houses are still the same, the population did not grow exponentially. Wtf is going on?
There’s an element of “be fiscally responsible and you too can save up” but more often than not, the answer is “make more money”.
Yes, that is the status quo now in Canada, you need to make $150,000 a year, minimum, to afford a mortgage to buy a low-quality apartment or home.
That's right. You can do everything right and still live and die poor. End the myth of meritocracy, it's all classism.
So your house was somewhere in the 75k to 150k range? Average home prices where I live and work are 800k. That would mean a down-payment of 80k to 160k. You would absolutely "need to have super rich parents" to get that kind of help. I'm happy for you that you were able to secure a home of your own with the help of family. That just isn't a simple reality for most most people who don't have super wealthy parents where I am from.
You only need 3% of the loan for a down-payment. That would be $500k assuming OP did not add anything in.
My parents helped my wife and I a bit. I grew up in a 1000 sqft house with 2-3 other siblings. I do, however recognize that not everyone's parents were lucky enough to have that much stashed away but should still have the opportunity to purchase a home.
I'm italian and here in 800k dollars is a very big house in a very good place. Or a good apartment in a big city. Your salaries are so good? I mean here median salary is like 1.9k dollars/ month ( after taxes and health insurance ). Your salary after taxes and insurance should be 6-8k dollars/month for a normal job. You have such high salaries?
Borrowed 3k from my bad didn't have to pay back. There is nothing wrong with getting help from family to buy a home. Fuck this article. The housing issue is caused by large corporations who are buying up all the houses along with interest rates keeping average person from buying a home.
There is nothing wrong with getting help from family to buy a home.
It is indicative of a problem that nearly half of home buyers have to. And indicative that we are possibly heading in a direction where only those with familial wealth will own housing. This is objectively a problematic direction.
Also, yes, if it's some absurd amount like $200k borrowed, nepotism is the right word. A couple grand may not be a lot to you, but there are places where it is as well. I know for a fact plenty of people from my hometown would struggle to loan their child even a couple thousand to buy a home. But the child is stuck paying rent that's more than a mortgage, keeping them from savings up for said down payment. The fact we can't save money is a problem, and parents giving their children money to buy a house just masks the issue except for those without that money.
I wish I had a rich bad.
Not enough now, here in the UK at least
Single 35yo. Earning alright. Mortgage on a 160k flat required a £90k deposit. Was a fucking nightmare, but at least I got it locked in at 4%
God, if only people could just like pool their resources together to build homes or something...
We could even call it something like "social housing," and have it be a publically regulated service instead of treating housing as some sort of game of investment for the wealthy? No no, totally impossible...
Even going back to the way things were in the 70's where workers got a fairer share of the products of their labour that wasn't leeched away by non-productive shareholders would make a huge difference. There's a reason you could buy a house on a single income when you had 5 kids back then.
Hell we had deals where if you build the house yourself, they will give you the plot of land absolutely for free. But that was 30 years ago. I am absolutely sure people these days couldn't do it - either not manually skilled enough, but have the money, or manually skilled, but their job doesn't pay well enough to afford spending time building a house.
Well, the 70s was before the time of Reagan and Thatcher coming in and wrecking unions and deregulating commerce and industry.
You also pretty much described what S&Ls were.
Honestly wish they could make a comeback, but we'd need to ban them from becoming national organizations. Their biggest benefits were that they helped people get houses, provided proper financial advice, and kept money local.
We are limited by the technology of our time
They are called condos
Sure that totally worked for the Soviet Union.
And again, the corporate media is blaming anyone but real estate companies and market speculators.
Market speculators are a symptom of the problem, not the root cause. God knows "people giving their kids money for a downpayment" certainly isn't the root cause.
The foundational issue is that many high demand markets have artificial limitations on the amount of housing, and it's easier and more profitable for real estate developers to shit out mcmansions in the suburbs than denser housing where it's needed.
Demand keeps going up because the population keeps going up, while supply is focusing on fulfilling only the luxury end of the market.
As a programmer, making $70k a year (in Czechia), I couldn't afford (according to the banks) more than $100k mortgage, so I got $100k from my parents (the house is $200k). And it's in a small village of 2k residents. You get 4 times less space (and it's a flat) for the same price in the capital. And it's on the cheaper side, too.
Or I could've gotten a small flat in a shithole that probably has black mold and will crumble to dust in 20 years. It's bad everywhere.
Similar situation here, except my wife's grandpa passed away and left her some inheritance. We used most of it for the down payment.
What a clickbait title. How is giving your kids money "nepotism" ?
Technically any advantage gained from family/friends is Nepotism. It's not purely bad ethically until you're talking about leadership and/or critical positions (like safety supervisor at a factory).
The fact that Nepotism is required to enter the middle class is not a healthy indicator for our society though.
That's really not technically true. The term "nepotism" originated from Catholic bishops and popes granting their unqualified nephews lucrative positions in the church ... it's always been seen as unethical, and has only been used to describe behavior perceived as unethical.
The dictionary definition of nepotism is "favoritism (as in appointment to a job) based on kinship."
This is a troubling signal of income inequality and social immobility, sure -- but it isn't nepotism.
That's not nepotism. Nepotism would be some land baron giving land to his kids, or a city official changing zoning to allow their family member to build something otherwise restricted.
Don't worry, I was trying to buy a house with my parents this past year. Even if they sold their current house to help, we couldn't afford what we'd need (3 bed 2 bath) since they don't have a ton of savings and only one of them is working still.
So even with help, some of us are still too poor.
I got 20K from my parents for my down payment when I was 45 and they still had to co-sign for me to get approved. No way in hell I could have gotten the house without them.
Lucky, our parents ain't paying for shit.
My parents are shit. They can die in their plastic house I will be renting to death but I don't want to take a single penny from them
Land of the free
Land of the fee
I'll definitely be buying my children houses, with all that tons of spare money I have around. Piles of it. Yep. Sooooo much money
Seriously, who are these people that can fork out $100k to each child? I don't even have retirement savings, and I'll die on the job, with any luck! #genx
Shit. I was in my 40s and it took a generous gift from my parents to buy my first house
My father did the same. He said "This is your inheritance. I'd rather see you enjoy it while I'm alive."
There are home buyers under 30? Shit I can barely afford to eat.
Almost reads like the author is fucking mad other people have rich parents who have the brains to help the very humans they created and brought into this life.
I for one support the revival of neo-feudalism and the divine right of kings, seeing as that is how the housing market is trending towards.
Yeah the market sucks, but being salty about parents financially supporting their kids ain't it
I'm not upset at parents helping their kids, I'm upset that we have a system that relies on you being born in fortunate circumstances to have a decent life.
I can see, however, that people buying homes with the financial help of their parents could make it almost impossible for people without that help to purchase. It's one of the reasons why I bought my first place in my 30s - I was competing with people who had huge down-payments courtesy of their wealthy parents.
It's the same reason why people resent homebuyers moving from a VHCOL location to a lower cost of living place, bringing with them the relatively large amounts of money they made from the sale of their old home or larger WFH salaries, driving up the housing costs and pricing out the locals. Also the same reason people dislike expats purchasing homes in relatively LCOL countries.
being salty
It's the year 2023.
Problem is that this is antithetical to much of the grandstanding that we do about the beauty and efficiency and yadda yadda of free markets. The narrative is, of course, that anyone can succeed wholly on their own merit in a free market economy if they just try hard enough, and if you're not succeeding, then you're obviously just not trying. Yet, here we've got data that throws an asterisk into the mix and says that if you want to buy a house, you're probably going to need to have all three of:
None of which any individual is in any kind of control of. You can't tryhard your way into having wealthy parents that are happy to buy things for you, so now we're forced to re-examine the system and whether you really can succeed just by trying hard. The answer is more nuanced, but it boils down to luck. Yes, it is possible, given the right circumstances, that hard work can lead to success. In the overwhelming majority of cases, however, hard work means squat compared to luck. Other things are much more critical to success in our economic system, including owning assets, having powerful connections, and having the right skillset combined with the right opportunities, and most of those things boil down to luck.
I'm mortgaging a house, but I'm not delusional enough to believe that luck didn't play a role. We got very, very lucky to have the right opportunities at the right time, as well as to have one parent with the money and willingness to share it to help us get into our starter home. Failing one of those, which would have been simple enough to have failed, we'd still be renting and living in a much worse financial situation, both in terms of monthly bills and net worth. We worked for it, yes, but pulling on your bootstraps isn't enough, and it's time to stop pretending that it is. It hasn't been enough for a long time, and I can't fathom that it ever was the case.
hard work means squat compared to luck
More often than not the only rewards for hard work is more work and ruined health.
other people have rich parents who have the brains
bank accounts
I dont know why you're conflating throwing money at your children with intelligence. If anything, it'd be empathy over brainpower.
More like the problem is only people with rich parents can now afford owning a house. It's disgusting.
Well I’m pretty mad that I’ll never be able to afford a house, despite having a good solid job. My parents aren’t rich, so they can’t help me. And while I’m not mad at them for not being able to help, I am mad that all other things being equal that puts me at a disadvantage.
Here’s a hypothetical scenario: Let’s say I make $60K a year, am single, with significant student debt. Let’s also say because of the pandemic payment pause, maybe I was able to save, like $5K, and I want to buy a house. Not gonna happen. Now take all the same things but add in well-off parents who could help with a down payment. That hypothetical person gets a house. They have a definite advantage. To me, that’s not just unfair, it perpetuates a system of wealth transfer that only helps part of the population. Everyone should have the same opportunity to own a home, if they want to.
Don't forget the tightening of lending rules going on. Even if you have the down payment, most will not qualify for the mortgage unless they have some one co-sign (bank thinks you can't pay $1000 mortgage, so you have to pay $2000 rent).
Co-signing on mortgages us not a standard practice tho
If you got down payment % and income ratio, you get a mortgage. It ain't that hard, bigger issue is finding a house to match you income.
Good point. I’d never get approved for a mortgage on my own, so I’ll be stuck paying rent that’s more than any normal mortgage payment. It’s so clearly rigged against me and people like me.
Only 40%? That seems....not true.
I bought my first home at 19, in the middle of the 2008/9 housing market crash. I made an exceptional amount for my age, and put a good deal less than 20% down.
I'd guess a lot of that 60% are in the same boat ... doing well for their age, and taking out an FHA loan.
My wife and I had enough for a down-payment but my parents leaning me $10k at a lower rate was helpful, vitally getting rid of the PMI quicker.
Helping kids with their down payment isn't exactly some new thing.
The fact that it's such a large percentage of new home owners is a new thing
It's the only way to afford a home anymore
Lol, I had to do the same in 2008. Nothing's changed. Except it's only gotten more expensive
Nothing is going to fundamentally change so long as housing supply drastically falls short of the demand. There's no way to escape the core issue that we don't have enough housing units in the places people want to live, and so the units that are available are going to go to the wealthiest people seeking them.
only 40%, I guess this isnt tracking people who have no show jobs for their family business
Lmfaooooo Bruhhhh I'm under 30 and I'm living with my parent rather than getting help moving out.
Obama (or Illinois?) gave me 10k down payment in 2009 and I got a tiny townhome at 23 right after I got a job outta college. I stayed in it for 10 years and traded it in for a bigger house like a crab after I got married.
I was not money conscious at the time but my dad pretty much forced me to get a house if I had the means. I'm glad he did.
So I guess I was also gifted my down payment from my parents and other tax payers parents.
I think that there's two things to keep in mind when buying a house:
the first is that notwithstanding rising interest rates which you especially in America should be able to mitigate with long-term mortgage rates, it locks your cost of housing in time. What you pay for a house is going to be what you pay for house. And so that's obviously a bit of a problem with house prices go down, but if they go sideways you're fine and if they go way out like they have it's really good.
But the second part of that is that people need to buy a house that they can actually afford because the cost of their house is stuck in time and so if you buy something really expensive and it's never really not expensive for you, then you have just made a long-term commitment to something that you can't really afford.
In canada, many mortgages are variable rate, and of the fixed rate options the longest lock in that most people do is 5 years. Once you start rising above that, the cost of money goes up considerably. In spite of that, I locked in at a decent rate in 2020 for 10 years which is virtually unheard of up here, and reduce my amortization by 10 years. I'm not going to lie, I am bragging. Really proud of myself for correctly predicting exactly what was going to happen in spite of every politician in central banker assuring me that it wasn't going to happen.
I got money from my ex’s family to buy my house in my 30’s.
Lots of people go on about how everyone could afford a home back in some golden age. Those homes were a lot smaller than the huge things that seem to be the standard today. Also living in prime areas like NYC has always been expensive. Slums were pretty common way back when in the cities.
Edit: I just saw an article saying the average size for new detached homes has gotten 10% smaller as land in developed areas has gotten scarcer. Prices aren't going down with this though. I wouldn't be surprised if we see a return to townhouses (similar to council houses in England). 3 deckers were built in the north for housing the influx of factory workers.
You're getting downvoted, but this is legitimately part of the issue. There is vastly less inventory of starter homes to buy, because home builders have been focused on building bigger and bigger (more lucrative) houses to sell at the upper end of the market.
Meanwhile apartment buildings (of the non luxury variety) are being built far less frequently.
I'm downvoting because of the dismissive "living in NYC has always been expensive". It's not just NYC and SF anymore. Everywhere is crazy expensive.
Seriously. I never see starter homes made anymore. When it comes to apartments they are always marketed as "luxury".
Ok but let’s stop blaming people for buying places to live and recognize that a larger problem is corporations buying properties by the dozens and using them as sky-high rentals or just a place to park money.
No corporation should be able to own housing. Corporations aren't people.
Not according to the citizen’s united ruling 😡👎
I'm okay with blaming nepotism. I also want to point out the other problem is the vast majority of new housing builds in cities is entirely luxury condos. You can't fix a supply and demand issue if you never address supply.
Calling that nepotism is a stretch imo. There is nothing wrong with borrowing money from your parents for a down payment just like there's nothing wrong with your parents paying your tuition.
The problem you highlighted - luxury development - is a significantly bigger issue. And that's less of an issue than corporate landlords.
Then there's private rentals which I'd say is the biggest factor involving individuals (not companies)
But a 28 year old borrowing money from dad is a drop in the bucket. It feels unfair to me to place any blame on them at all
Statistically speaking first time homebuyers are buying a single family home in the metro area of a smaller city. A large part of the reason they are making said purchase is to minimize cost.
I think you mean the vast majority are single family homes. Lower density = fewer new houses = less tax revenue per unit area = US' crumbling infrastructure cities can't afford to fix becccause: low density
You're okay with blaming "nepotism"? For what?
We do have supply issues, but it really isn't "luxury" per se (ignoring that "luxury" is just a marketing term that means basically nothing).
However, there is a distinct lack of small-medium (800-1500 ft²) housing being built in most areas.
The two reasons housing is expensive:
The large portion of "increased costs" we see with housing over the last 50 years is basically just an increase in size (ignoring specific markets). Maybe 20 percent of the increase is for other reasons (one of which is the addition of 2+ car garages).
When do we get to blame people for having too many babies?