Young Arizonans rely on the bank of Mom and Dad for homebuying
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Younger Arizonans are increasingly relying on the bank of Mom and Dad to make their homeownership dreams a reality.
Why it matters: Interest rates have stayed stubbornly high, and Valley home prices continue to tick up, leaving first-time homebuyers with a difficult choice: Keep waiting and likely pay a higher purchase price down the road or act now and stomach hefty monthly payments.
- With family help, buyers can make a larger down payment now, decreasing their monthly payments and allowing them to start building equity sooner, Phoenix Realtors president Sheryl Bowden told Axios.
The big picture: More than a quarter of people between the ages of 18 and 43 who recently bought homes say they used family cash for down payments, up from 23% last year, according to Redfin research.
- Over 35% of millennials and Gen Zers who plan to buy a home soon expect to receive a cash gift from family to help fund their down payment, the real estate company found.
By the numbers: Just about 11% of Phoenix homebuyers last year were under the age of 35.
- U.S. homebuyers are now the oldest on record, with the median age of first-timers reaching 38.
How it works: Bowden said parents are increasingly looking at down payment assistance as an early inheritance.
- "Why [not] pass the money along now and let them start building their wealth while you are alive?" Bowden said.
Threat level: Buyers should work with their real estate agent and a mortgage professional to ensure a parental gift doesn't have negative tax implications.
Zoom in: Axios Phoenix reader Cliff Connors told us he and his wife went beyond giving a 20% down payment to their son and decided to become co-owners and invest 30% of the purchase price so he could afford the monthly payment on a nicer Phoenix home in 2019.
- "The houses for which he could afford the mortgage payment weren't very nice," Connors said.
Reality check: Phoenix home prices have climbed 67% since 2019.
Flashback: Parental help in homebuying isn't new — many of you shared stories of your parents helping out with a down payment in the 1990s.
Yes, but: Down payments here and nationwide were often less than $20,000 in that decade, and many children saw their parents' gifts as a loan they repaid in short order.
- Compare that to today, where a 20% down payment on the average Phoenix home is about $90,000.
- Bowden said she's working with a client whose parent gifted her $100,000 — a far cry from the $15,000 loans many of you reported receiving in the '90s.
What we're watching: Those "who don't have family money are often shut out of homeownership," Redfin chief economist Daryl Fairweather said in a research report.
- In time, this could widen the homeownership gap between Black and white families, an Urban Institute analysis suggests.