The housing costs on the coast are so high that there is really no way for a young couple to purchase the home they wish to live in. Starter homes in some cities are selling for 500 Thousand dollars plus. So more than one third of young adults looked to their parents to help fund their first home purchase in 2005. This number was up from 18% in 1991.
Instead of waiting till the parents die, the baby boomers are starting to transfer their wealth to their children earlier through the equity in their homes. The property appreciation has been so drastic that the parents have recieved a windfall in the last few years. Now they are making sure that their children and grandchildren are getting the benefits of the appreciation by putting the assets into the next generations homes.
The first answer is good ol’ Ma and Pa, or as one Money Magazine article put it, “The National Bank of Mom and Dad.” According to the National Association of Realtors, last year 37 percent of first-time homebuyers reported that they had paid for their down payments in part or in whole with a gift, loan or inheritance from a family member or friend. (In 1991 only 18 percent of first-time buyers reportedly received monetary gifts from family or friends for down payments.)
In areas where prices are especially high, I wouldn’t be surprised if the percentages were higher. For the vast majority of the people I know who have bought a home in the Bay Area some time in the past five years, financial help from family has been an essential ingredient. Instead of waiting until they die, many older parents are helping their kids buy housing now. via the SFGATE
Hat tip to the Matrix Blog and The Real Deal.
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