The Bank of Mom and Dad is playing a growing role in a housing recovery struggling to provide more traction for the U.S. economy. Last year, 27 percent of those purchasing a home for the first time received a cash gift from relatives or friends to come up with a down payment, according to data from the National Association of Realtors. That’s up from 24 percent in 2012 and matches the highest share since the group began keeping records in 2009.
Those numbers will probably keep growing this year as younger Americans remain constrained by student debt, tough entry into the job market and stricter lending rules that require more cash up front. At the same time, rising stock and property values give their baby boomer parents the ability to assist those wanting to lock in near record-low borrowing costs. The inability to come up with the down payment was the top reason for renting rather than buying property, according to the Federal Reserve’s report on the 2013 economic well-being of households issued in July.
The report also showed 10 percent of those leasing apartments last year were looking to buy a house. Deborah Baisden, a Realtor with Prudential Towne Realty in Virginia Beach, Virginia, is witness to the pickup in cash gifts, particularly among parents assisting their children. “We’re finding more and more parents are gifting money,” Baisden said. As fewer deals and less inventory prompt investors to retreat, the field may soon open up for first-time buyers as sellers look to expand the market, said Lawrence Yun, NAR’s chief economist. “With the investors stepping away, for some first-time buyers and millennial buyers, they have less competition,” Yun said. “So it would be an opportune time to enter the market.”
Source: Bloomberg Financial
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