Twin Cities millennials’ secret to a down payment: family money
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For some millennials in the Twin Cities, the only way to buy a house is with family help.
Why it matters: While a large share of millennials are tapping their parents or other relatives for help with a down payment, not everyone is so lucky.
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: "With money inherited from my wife's late grandmother and a gift from my dad, we had a down payment — without that we never could have afforded to buy," Apple Valley homeowner Zachary Thompson tells Axios.
- South Minneapolis homeowner Lane DeSalvo tells Axios a family inheritance was "the only reason" they could buy a house when interest rates were 3%.
Meanwhile, Twin Cities millennial homebuyers without family money are getting creative in dealing with high interest rates.
Zoom in: Emily Blessinger, a 31-year-old teacher who rents, says homeownership feels out of reach on her own. She's thinking about splitting a duplex in Minneapolis or St. Paul with a friend.
- "The only real estate within my price range are condos, but the H.O.A. fees typically make them too expensive to own," Blessinger says.
Renting space in her sister's house for $600 per month helped Taylor Narváez Claman and her husband pull together the funds to buy. Two years and a job change later, they bought a rambler in St. Paul.
- "Putting away savings is hard, student loans returning might add to the stress a bit, but it feels good to be investing in our future," says Narváez Claman, who tells Axios they plan to refinance if mortgage rates drop.
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.
Reality check: You don't need to put 20% down. The typical down payment in the Twin Cities metro area was 10% in April, per Redfin.
- With an F.H.A. loan, homebuyers only have to put 3.5% down.
Be smart: 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.
- Homeownership "sucks the cash right out of you," at least at first, McBride says. You need to save beyond the initial down payment to weather unexpected additional expenses — the top reason millennial homeowners have buyers' remorse, per Bankrate.
The latest: Housing industry groups are urging the Fed to stop raising interest rates.