Millennials, Gen Z Trust ‘Bank of Mom and Dad’
Millennials and Gen Z have become increasingly prevalent in the housing market. But to get there, they’re still turning to the “Bank of Mom and Dad.” And that’s having a ripple effect on their Boomer parents.
loanDepot, Foothill Ranch, Calif., said a national survey of more than 1,000 Americans found 77% of Millennial and Gen Z respondents are turning to their parents for help becoming first-time homebuyers. And, of the one in four surveyed who indicated that they were not interested in buying a home, 61% indicated that their interest in buying one would increase if their parents helped them.
The survey reported parents are mostly aligned with these expectations, with 65% of parents aged 39 or older surveyed indicating that they were willing to help their children buy a home. However, the majority, 76%, had not, to date, assisted with financial support.
The survey said this willingness of parents to help could delay retirement for many Boomer parents, with 18% of respondents who indicated that they planned to help their children buy a home advising that their retirement was on hold. Additionally, one in four parents who indicated their children still live at home also said their life and retirement were on hold as a result.
The survey said exactly how much financial assistance—and what kind of help—these potential first-time homebuyers expect varies. The most common expectations included help with a down payment (38%), co-signing the mortgage (31%) and helping with closing costs (24%). Of those expecting down payment assistance, the majority of respondents were looking for less than $10,000, while 19% anticipated $10,000 or more.
The survey also found that instead of taking a more traditional “starter home” path to home ownership, many Millennials are holding off entering the market with a goal of purchasing a “forever home” as their first home. In fact, 66% of respondents would prefer to hold off for a “forever home” than purchase a starter home sooner (35%).
John Bianchi, loanDepot EVP and National Production Manager, said this gap in financial expectations points to an opportunity to provide greater guidance to Millennials and Gen Zers about modern mortgage basics, including what it takes financially to enter today’s housing market.
“The desire to own a home of your own has not changed over generations,” Bianchi said. “But what has changed significantly are the array of loan options available today, both in loan types and down payment requirements. One persistent misconception is that a 20% down payment is needed to purchase a home, and that could be factoring into some of this purchase planning. The truth is, there are many excellent ways that Millennials can get into a home.”
