Considering 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.
Interestingly, 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/
Yep 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…
> 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.
The 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.)
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.)
as 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
you 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.
well 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
I think this is short sighted. Even if you want to ignore all the arguments about what's best for society and just focus on your own personal gain, what about your great grandchildren? Or your great great grandchildren? It's estimated that over half of children do worse than their parents today. Investing in a strong safety net and high social mobility are a way to ensure that if generations from now branches of your family tree fall out of middle class they'll have a chance to climb back up again.
> Investing in a strong safety net and high social mobility are a way to ensure that if generations from now branches of your family tree fall out of middle class they'll have a chance to climb back up again.
yes, and I pay six figures in tax every year so there is plenty enough from me in the community pot for you to achieve this
if you instead send the money to Ukraine, thats your choice
> as a parent, my obligation is to my family, not someone else's
As a member of society, however, your obligation is to other members of society.
I'm not going to argue that you're not doing that. I do think tax rates are too low on the top 10% in the US, assuming that's where you're from (seems safe) -- but the biggest shortfall is surely on the top 0.1%.
The reality is, opportunity for others is objectively declining.
Damper on social mobility is inequality itself and that young people can not afford flat without help. Families helping their own kids is not damper on anything. Moreover, it is completely normal behavior historically.
I'm not sure what you mean by this. In 2010, my dad gave me $10K to help with closing costs and the down payment of my first home in addition to the money I already already had saved up. It was absolutely the right time to buy a home since it was during the great recession as I also qualified for a $10K first time homebuyers tax credit. My social mobility has been a hockey stick upward since then compared to my parents, due to going to college and having a good job.
The fact that your parents could give you that money suggests you were already not at the bottom of the social mobility ladder. It's possible you've moved up the ladder, but it's also possible that your parents did the moving up the ladder (when home ownership was more accessible, jobs paid better), and that you haven't actually moved much from their position, even if you've got a better start in life.
Many millennials currently find themselves in this position, myself included. I'm better educated than my parents (by qualification), and I earn more than them, but they own properties and cars and go on holidays frequently, because they bought houses at the right time and earned more proportionally to their costs earlier in life. I'm still very much in the same socio-economic range as my parents are now, they did the moving earlier in their lives, I'm unlikely to be able to move.
Confused why you don't think this is a problem?? just because family will be there for you when no one else will doesn't mean they are financial liquid enough to support you with $50,000-$100,000 in cash. Clearly that is your situation but for the VAST majority of Americans that is not the case.
Average home price in America is over $400,000 which means a 20% down payment is $80,000.
People just starting out aren't usually aiming for the average home. There are lots of homes and condos that are half that price - depending on location.
>> which means a 20% down payment is $80,000.
If you are faced with this situation, an FHA loan requires 3.5% down and you can buy with a sub-600 credit score. FHA loans are designed for first-time buyers.
This is a signifier that there is less social mobility within American society than in the past. The newest generation should not have to rely on the Bank of Mom & Dad for a down payment to do what Mom and Dad did without that assistance.
Also, parents giving you money has zero correlation with your "good, supporting family" statement. Don't draw a comparison of two completely unrelated things.
"Everyone wins", yeah expect for the people who's parents don't have a spare $60,000 to give their kids for a down payment on a home.
> "Everyone wins", yeah expect for the people who's parents don't have a spare $60,000 to give their kids for a down payment on a home.
my bank deposits are available to be reloaned out to people who don't have a family resource
there is no real injustice here, we all contribute to collective support in many ways, from taxes to loan assistance to education and infrastructure that elevates all and provides opportunity for all
you will always have some people who have an advantage others don't, that's life
> parents giving you money has zero correlation with your "good, supporting family"
How is that possible for there to be zero correlation?
It seems like there's an incredibly strong bi-directional correlation between "my family is supportive to me" and "my family sometimes gives me money".
Until a study says otherwise, I'm going off of my own experiences. I've met people with parents who were loaded, but wouldn't give them any money because they wanted to drive home the idea of working for the money. But also wealthy families who will give their kids money when asked just because they know that's the quickest way to get them to go away. I also have many friends who live at home with their parents and are, essentially, dirt poor, but have a supportive, loving family.
Family dynamics and wealth aren't tied by any connecting factors. Being born into a wealthy family doesn't give you a higher chance of having a good, supportive family. Just as the opposite statement of being born into a poor family means you'll have a bad, unsupportive family.
not imho...for example, if I own a company and wish to make my son or daughter the next CEO...that is my right and my decision if I have the ownership rights to make it happen
if my kids screw it up then I would lose not only my own wealth but their inheritance...so there is still risk even to the beneficiaries of nepotism
I have zero qualms with people putting family first
I agree with you 100%. I don't see how this is different from parents helping with college or your first car. Its their money, they can do what they want with it. Reading the comments here are scary, its almost like people want a gift/estate tax on down payment money gifted by family, in the name of "equity".
The problem isn't that family is helping, the problem is that homeownership is unattainable if you're not wealthy and don't have family with the means to help.
I’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
> 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.
I 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?
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.
That surprises me! I can happily pay the mortgage but saving the downpayment is a pain, even as a married couple. It's not impossible, just a slow grind. Of course by the time we finish I assume the prices will have gone up, so there will be a bit more grinding there, but we're hopefully not trapped in some Achilles and the Tortoise predicament.
What I’ve seen in HCOL areas of California is either of a couple's parents flat out gifting them a few hundred thousand dollars for a house, it’s not a loan
Most people already pay rent for housing, going from rent payments to mortgage payments is not a huge change for them. Down payment is harder as most people usually don't accumulate large quantities of cash.
There's certainly different types of people who struggle to afford a home.
For people living in an expensive apartment, they might be barely making rent. Whereas they could obviously afford a mortgage for a similar monthly amount - but since they're living paycheck-to-paycheck they can't save the prodigious 20%. So they're stuck.
Of course perhaps some people have a nest-egg from a windfall or inheritance but then couldn't handle the monthly payment.
The main barrier these days to putting less down is twofold - one, you need to pay PMI which is just compounding the monthly payment problem. Two, good fricking luck getting your offer accepted with <20% down in these times. Sellers read into offers more than just "is this financed y/n" and there's IMMENSE preference for buyers who can put 20% down, because it signals that a) if necessary they could pay PMI and drop down the up-front % in order to close on a contract, and b) they probably have more cash than just that 20% and are only stopping at 20% because it is customary and they could weather unforeseen issues more easily.
To put it in anecdote form: I sold my house in 2020. We had 8 offers presented to us after 1 day on the market. All were for 20% down because my agent didn't even hear offers from people with less down, since we had so many at 20%. In mid-2023, my brother bought a house in a similar sort of area (metro area of a major-for-the-midwest city). 2 days on the market, he was one of 3 offers, all for 20% down and about 50k over asking (the house was priced somewhat low as a marketing strategy, but I'm guessing based on comps they still had to go in about 10k over a non-meme version of the list price). He wouldn't have even been in the running if he didn't have 20% down. And he also had to waive all contingencies which almost made his financing fall through/be late due to something stupid a random inspector said.
It's tough out there. Even if you can nominally "afford" a house, it can be hard to actually close on one in the open market without someone more financially established who is able to backstop you in various ways.
I think my down payment was 5% for a 3-3 in MCOL…mortgage is only a few hundred more than our friends who rent an old 2-1, although we live in a small low income village 30 minutes from the more prosperous city they live in.
We would not have been able to afford a mortgage there because the only available housing stock requires too much work and $$$ to be worth it. We only bought this house because it was a fair price and all the HVAC was new. Nothing else in our market was acceptable at the time.
So basically, down payment is easy, monthly mortgage is ok, but any contracting work is a painful hemorrhage.
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.
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
My 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.
The 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.
If 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.
Like, 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).
Seems 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.
I 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.
Not 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..
38% 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.
Something 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.
That 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.
Buying 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
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[ 1.9 ms ] story [ 156 ms ] threadIs this really a “previous generation” thing?
And past generations before also experienced very HIGH interest rates as well as low.
https://fred.stlouisfed.org/series/FEDFUNDS
In general, hospitals do want parents to take their offspring home from the nursery after a day or two.
This hyperbole kills reasonable discussion. Right to shelter != right to own property, and any property at that.
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.
(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.)
How much was the house and how much do they sell for in your area now ?(approximately)
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.)
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
Plus dropping interest rates also does cause economies to overheat so there is job creation.
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
but even then, my tax dollars pay for public education, infrastructure, public college, roads, etc etc ....I am most definitely subsidizing opportunity for others
They're saying its a problem for social mobility when "how much money your parents have" becomes a gatekeeper to homeownership.
There’s a lot of variables at play on house prices: desirability, location, space, build cost
What legislation can make housing more affordable ?
yes, and I pay six figures in tax every year so there is plenty enough from me in the community pot for you to achieve this
if you instead send the money to Ukraine, thats your choice
As a member of society, however, your obligation is to other members of society.
I'm not going to argue that you're not doing that. I do think tax rates are too low on the top 10% in the US, assuming that's where you're from (seems safe) -- but the biggest shortfall is surely on the top 0.1%.
The reality is, opportunity for others is objectively declining.
Inheritance is a thing and always was.
Many millennials currently find themselves in this position, myself included. I'm better educated than my parents (by qualification), and I earn more than them, but they own properties and cars and go on holidays frequently, because they bought houses at the right time and earned more proportionally to their costs earlier in life. I'm still very much in the same socio-economic range as my parents are now, they did the moving earlier in their lives, I'm unlikely to be able to move.
Average home price in America is over $400,000 which means a 20% down payment is $80,000.
People just starting out aren't usually aiming for the average home. There are lots of homes and condos that are half that price - depending on location.
>> which means a 20% down payment is $80,000.
If you are faced with this situation, an FHA loan requires 3.5% down and you can buy with a sub-600 credit score. FHA loans are designed for first-time buyers.
https://www.nerdwallet.com/article/mortgages/fha-loan
Also, parents giving you money has zero correlation with your "good, supporting family" statement. Don't draw a comparison of two completely unrelated things.
"Everyone wins", yeah expect for the people who's parents don't have a spare $60,000 to give their kids for a down payment on a home.
my bank deposits are available to be reloaned out to people who don't have a family resource
there is no real injustice here, we all contribute to collective support in many ways, from taxes to loan assistance to education and infrastructure that elevates all and provides opportunity for all
you will always have some people who have an advantage others don't, that's life
How is that possible for there to be zero correlation?
It seems like there's an incredibly strong bi-directional correlation between "my family is supportive to me" and "my family sometimes gives me money".
Family dynamics and wealth aren't tied by any connecting factors. Being born into a wealthy family doesn't give you a higher chance of having a good, supportive family. Just as the opposite statement of being born into a poor family means you'll have a bad, unsupportive family.
if my kids screw it up then I would lose not only my own wealth but their inheritance...so there is still risk even to the beneficiaries of nepotism
I have zero qualms with people putting family first
Thankfully my wife and I make good income and have been saving, but the treadmill doesn't work for everyone.
except those without rich parents
and kids whose parents never cared if they did dumb or illegal things
etc etc
we don't live in a world of equal outcomes and never will
I mean...you were born in the West instead of being born in a hopeless place like Gaza...how unfair!
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.
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.
For people living in an expensive apartment, they might be barely making rent. Whereas they could obviously afford a mortgage for a similar monthly amount - but since they're living paycheck-to-paycheck they can't save the prodigious 20%. So they're stuck.
Of course perhaps some people have a nest-egg from a windfall or inheritance but then couldn't handle the monthly payment.
The main barrier these days to putting less down is twofold - one, you need to pay PMI which is just compounding the monthly payment problem. Two, good fricking luck getting your offer accepted with <20% down in these times. Sellers read into offers more than just "is this financed y/n" and there's IMMENSE preference for buyers who can put 20% down, because it signals that a) if necessary they could pay PMI and drop down the up-front % in order to close on a contract, and b) they probably have more cash than just that 20% and are only stopping at 20% because it is customary and they could weather unforeseen issues more easily.
To put it in anecdote form: I sold my house in 2020. We had 8 offers presented to us after 1 day on the market. All were for 20% down because my agent didn't even hear offers from people with less down, since we had so many at 20%. In mid-2023, my brother bought a house in a similar sort of area (metro area of a major-for-the-midwest city). 2 days on the market, he was one of 3 offers, all for 20% down and about 50k over asking (the house was priced somewhat low as a marketing strategy, but I'm guessing based on comps they still had to go in about 10k over a non-meme version of the list price). He wouldn't have even been in the running if he didn't have 20% down. And he also had to waive all contingencies which almost made his financing fall through/be late due to something stupid a random inspector said.
It's tough out there. Even if you can nominally "afford" a house, it can be hard to actually close on one in the open market without someone more financially established who is able to backstop you in various ways.
We would not have been able to afford a mortgage there because the only available housing stock requires too much work and $$$ to be worth it. We only bought this house because it was a fair price and all the HVAC was new. Nothing else in our market was acceptable at the time.
So basically, down payment is easy, monthly mortgage is ok, but any contracting work is a painful hemorrhage.
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.
Edit: Not a taxman. Just trying to remember what ours told us. Better info in the following post.
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.
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.
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.
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.
https://www.irishtimes.com/business/construction/over-700-ob...
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.
As I suspected, we can see a big shift comparing 1993 to 2019.
Over the next 2 decades, almost all of that 32.1% supply in the 65+ group will become available.