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To Afford a Down Payment, Young Homebuyers Often Need ‘a Pot of Family Money’
By Adam Hardy MONEY RESEARCH COLLECTIVE
According to a new survey, 36% of Gen Z and millennial homebuyers are counting on cash gifts from family to help them with down payments.
With current mortgage rates flirting with 7% and typical home prices stuck well above $400,000, how are young adults able to buy a home?
A report released Wednesday by the real estate brokerage Redfin sheds some light. To afford down payments, Gen Z and millennial homebuyers are taking on second jobs, emptying their savings accounts and, notably, relying on the bank of Mom and Dad.
“Young Americans are increasingly turning to family to help fund down payments largely because it’s so expensive to purchase a home,” wrote Redfin’s Dana Anderson in the report.
According to the firm’s survey, 36% of young homebuyers — a group that includes adults under age 43 — are counting on cash gifts from family to help them afford home down payments. This number has doubled since before the pandemic, when Redfin asked the same question to millennials in 2019. At that point, only 18% said they were going to use cash from family.
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View RatesWhy it’s getting harder for young Americans to afford down payments
Part of what’s fueling the trend of tapping one’s parents for down payment assistance is rapid home price growth. Home prices have skyrocketed nearly 40% from pre-pandemic levels, Anderson noted.
Besides getting help from Mom and Dad to fund a down payment, 60% of young adults are saving up their own money, 39% are working second jobs and 22% are raiding their retirement accounts.
In addition to requiring multiple sources of funding, young homebuyers are making much smaller down payments than older generations.
According to separate research from the National Association of Realtors (NAR), the median down payment for 24- to 32-year-olds was 8% in 2023 — far from the golden rule of 20%, which is typically the threshold needed to avoid having to pay for private mortgage insurance.
Meanwhile, the report said, those aged 58 and older put down at least 20% — and the oldest homebuyers, up to 27%. NAR’s report also found that homebuyers age 58 and up were far more likely to say they “did not need to make any sacrifices” to purchase a home. The discrepancy is largely because these older homebuyers were able to at least partially fund their purchase by selling their existing home.
(Among homebuyers of all ages, the typical down payment in 2023 was 14%, NAR found. Assuming the median home price of $417,700, that down payment translates to nearly $60,000.)
According to Redfin, all of this points to one crucial fact: “Housing is simply too expensive.”
As Redfin Chief Economist Daryl Fairweather underscored in the report, this ends up creating a dichotomy between young adults who have “a pot of family money to dip into” and those who don’t. As a result, many young Americans without family money are essentially shut out of homeownership, ultimately contributing to wealth inequality.
“The American dream is just as much about class mobility as it is the home with a white-picket fence,” Fairweather said. “The housing affordability crisis has made both elements of the dream harder to attain.”
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Adam Hardy is Money's lead data journalist. He writes news and feature stories aimed at helping everyday people manage their finances. He joined Money full-time in 2021 but has covered personal finance and economic topics since 2018. Previously, he worked for Forbes Advisor, The Penny Hoarder and Creative Loafing. In addition to those outlets, Adam’s work has been featured in a variety of local, national and international publications, including the Asia Times, Business Insider, Las Vegas Review-Journal, Yahoo! Finance, Nasdaq and several others. Adam graduated with a bachelor’s degree from the University of South Florida, where he studied magazine journalism and sociology. As a first-generation college graduate from a low-income, single-parent household, Adam understands firsthand the financial barriers that plague low-income Americans. His reporting aims to illuminate these issues. Since joining Money, Adam has already written over 300 articles, including a cover story on financial surveillance, a profile of Director Rohit Chopra of the Consumer Financial Protection Bureau and an investigation into flexible spending accounts, which found that workers forfeit billions of dollars annually through the workplace plans. He has also led data analysis on some of Money’s marquee rankings, including Best Places to Live, Best Places to Travel and Best Hospitals. He regularly contributes data reporting for Best Colleges, Best Banks and other lists as well. Adam also holds a multimedia storytelling certificate from Poynter’s News University and a data journalism certificate from the Investigative Reporters and Editors (IRE) at the University of Missouri. In 2017, he received an English teaching certification from the University of Cambridge, which he utilized during his time in Seoul, South Korea. There, he taught students of all ages, from 5 to 65, and worked with North Korean refugees who were resettling in the area. Now, Adam lives in Saint Petersburg, Florida, with his pup Bambi. He is a card-carrying shuffleboard club member.