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The National Bank of Mom and Dad

Its is family tradition, necessity, etc. for parents to help their children by that first house. It could be argued that this event has become more critical in the recent housing boom and especially on the east and west coasts, where prices have risen faster than the central US.

The title for this post was taken from the very interesting article from Carrol Lloyd called Is the transfer of wealth to the next generation fueling the real estate market? [SFGate.com] [1] She discusses the sources of money to for first time homeowners borrow.

NAR reports that 37% of first time buyers got help from their parents, up from 1991 when it was 18. There is a certain irony here as the baby boomers reach retirement and are forced to provide more help to their children’s home purchases as they benefitted directly and significantly from higher housing prices, often to be used as a retirement vehicle.

In other words, inheritence money was used for the housing market.

However, not as much as one might think. The NAR also reports that 43% of all first time home buyers used “no money down” financing to get that first house. It was all about the mortgage payment, not the down payment.

No-money down buyers that are choked off in a rising mortgage rate environment. Thats a big number of buyers and will either place even more pressure on mom and dad or the housing market…or both.