Chicago millennials' secret to a down payment: family money
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For some millennials in Chicago, the only way to buy a house is to get help from family.
Why it matters: While the city's relative housing affordability attracts young people, saving for a down payment can be even more challenging when spending 30% of your income on rent is "the new normal."
What's happening: A Redfin report on "nepo-homebuyers" found 38% of recent buyers under age 30 nationwide received family money in order to afford their down payment.
What they're saying: Casey Moore, 35, and his wife started shopping for homes in Chicago this year after inheriting enough money for a down payment. High mortgage rates and H.O.A. fees swayed them to keep renting anyway.
- "I do understand the process of gaining equity and having something that, in theory, will retain its value, but the trade-off is just too high," Moore tells Axios.
The big picture: Among U.S. millennials who don't own a home, 44% say income is the top barrier to buying, according to a Bankrate study. And 43% say they can't afford the down payment and closing costs.
Zoom in: An inheritance, a gift in lieu of financing a wedding or another form of generational wealth funded nearly all of the down payments in Chicago homeowner Sarah Magnuson's social circle.
- There's "no mystery about the immense privilege and dumb luck that afforded us these homes," says Magnuson, who tells Axios about 20% of her millennial friends are homeowners.
- For their wedding, Chicago renter Alexis Smoot and her partner are asking people to gift money toward a house.
Reality check: You don't need to put 20% down. The typical down payment in the Chicago metro area was 10% in April, per Redfin.
Yes, but: Waiting to buy isn't a bad thing. Taking time to save, invest, build your credit and advance in your career can meaningfully grow your bank account, says Bankrate chief financial analyst Greg McBride.
- And save beyond the initial down payment to weather unexpected additional expenses — the top reason millennial homeowners have buyers' remorse, per Bankrate.
Go deeper: Extreme weather could raise insurance rates across the country.