Is it fair to call the millennial generation one of the least independent generations we have had? We may get some pushback for suggesting that, but speaking strictly about housing arrangement, that categorization is not exactly inaccurate.
Demographic and living arrangement research from the Pew Center suggests the incidents of young adults 18-34 living at home with parents are the highest in 130 years (!). There are also recent evidence that when young adults leave home to set up their own nest, they often do so with the financial help of mom and dad.
In a latest Q4 2018 survey by ValueInsured, millennial homebuyers who plan to buy a home “in the near future” were asked if they expect financial help from their parents and/or their in-laws to fund the down payment, typically the largest financial prerequisite and barrier to owning a home. Overall, 56% of all millennial expectant buyers reported they do not expect financial help, while over 4 in 10 millennial buyers (44%) said they do.
Among millennial who are planning to buy their first home, only slightly over one-third (37%) say they plan to rely on down payment help from mom and dad. The majority of them do not expect significant help:
26% of all first-time millennial homebuyers – or 70% among those who plan to get funding help – expect to receive “some help under $5,000” toward their first down payment from their parents or in-laws.
5% of all first-time millennial homebuyers – or 14% among those who plan to get funding help – expect to receive $5,000 to $9,000 from their parents or in-laws.
4% of all first-time millennial homebuyers – or 11% among those who plan to receive down payment help – believe they will receive $10,000 to $49,000 from their parents or in-laws.
2% of all first-time millennial homebuyers – or 5% among those who plan to receive down payment help – believe they will receive over $50,0000 from their parents or in-laws toward buying their first home.
Interestingly, millennials who already own a home and plan to upgrade are more likely to expect down payment help from mom and dad, and in higher amounts. It is possible these existing millennial homeowners already received parental help with their first home – this could be a factor that sets them apart from their non home-owning peers – so they expect help again with their next home purchase. Another possible explanation points to the higher propensity that young homeowners come from more financially comfortable families, who are more able to help their adult children buy a home – or their next upgrade home. Among millennial upgrade buyers:
57% expect down payment help from their parents and/or in-laws.
26% of all millennial upgrade buyers – or 46% among those who plan to get funding help – expect to receive “some help under $5,000”.
9% of all millennial upgrade buyers – or 16% among those who plan to get funding help – expect to receive $5,000 to $9,000 from their parents or in-laws.
10% of all millennial upgrade buyers – or 18% among those who plan to get funding help – believe they will receive $10,000 to $49,000 from their parents or in-laws.
12% of all millennial upgrade buyers – or 21% among those who plan to get funding help – believe they will receive over $50,0000 from their parents or in-laws toward buying their first home.
In other words, nearly 1 in 6 millennial upgrade buyers, despite presumably having home equity assets of their own, expect to receive funding help from their parents or in-laws toward their next home purchase, and among them, 1 in 5 expect to receive a whopping $50,000 or more.
One thing we must not overlook is that a cash-out refinance by the parents could be one of the sources of these generous gifts or loans. If parents appraise their home at market high and take out a $50,000+ loan to help fund a millennial child’s down payment, what happens when home prices correct – as they have in some major markets such as Seattle and Dallas – and both the child and parents’ homes are not valued at what they were bought or appraised for?