Study: Those With Financial Aid From Family Can Buy Homes up to 12 Years Faster Than Their Peers

Fast facts:

• Our recent study of data surrounding first-time home buyers has found that people who receive financial assistance from their family are able to buy a house up to 12 years ahead of their peers.
• The average age people buy a first home has gone from 28 years old to 32 years old over the past several decades, according to National Realtor Association data [1].
• 43% of people under 35 get financial help from family when buying a house [2].
• The current average down payment is approximately 10-12% of home value [3]. Based on the national median value of a home being $250,000, a potential new home buyer needs to save approximately $25,000 [4].
• The average person under 35 saves less than $2,000 a year, meaning with no financial assistance it will take them 12 years to save for a home [5].

For years, the average age of first-time home buyers has gone up. What used to be a pretty common life event for many in their twenties, now pushes into the mid-thirties for the average person as the burden of student loans, wage stagnation, and housing prices have prevented younger people from being able to enter the home ownership market.

The National Association of Realtors reported in 2018, that the median age of first-time home buyers is now 32 years, trending upward over the last several decades, where previously it was more common for someone in their mid-20s to be able to buy a home.

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Notably, when taking into account the median age of all homebuyers, irrespective of whether it is their first home purchase, the age gap has grown the widest it has ever been. Bloomberg reports that the average of all homebuyers is 47 years old, a number that consistently climbs every year.

“Housing affordability is so difficult today, especially when coupled with rising rents and student loan debt, that they’re finding different ways to enter home ownership,” Jessica Lautz, vice president of demographics and behavioral insights at the Realtors group in Washington said in the above Bloomberg article.

And while all of the above makes sense given the financial climate of most adults under 40, there is one clear divide between the under-35 age bracket when it comes to first-time home buying accessibility: financial assistance from family.

The Reviews.com home research team has found that the younger a person is when they buy their first home, the more likely it is that they have received direct financial assistance from their family to do so.

In fact, based on our research, if someone is gifted a notable sum of cash from their parents in order to help them buy a home, it can allow them to do so at least twelve years ahead of their peers.

Calculating the median down payment being approximately $25,000 against the average savings rates of those in their twenties and young thirties (approximately $1,500 – $2,000 a year), it will take the average person under 35 about 10-15 years to save for a down payment, the largest hindrance for many buying their first home.

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With 43% of people getting financial assistance from family to buy their home, this timeline gets a lot shorter. Many people under 35 can handle the monthly financial responsibilities of owning a home. Things like the monthly mortgage, home insurance, and property taxes are often not much higher than local rental rates for similar square footage. But saving for a down payment can easily take a decade or more, meaning those who receive financial assistance with this portion of the home buying process will have an obvious advantage.

Sources:

• [1] Young Homebuyers are vanishing from the US
• [2] Here’s how many millennials got money from their parents to buy their home
• [3] Highlights from the profile of home buyers and sellers
• [4] Here’s the typical home value in every state
• [5] Report on the economic well-being of US households in 2016-2017

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