Why Your Parents’ Homeownership Status Can Impact Your Ability to Become a Homeowner

Several factors can play a role in your journey to homeownership, and one of them might be your parents. According to experts, if your parents are homeowners, you are more likely to follow in their footsteps and become a homeowner yourself. This phenomenon can be attributed to various factors, such as financial assistance, shared living arrangements, and the transfer of knowledge about homeownership. Let’s explore how your parents’ homeownership status can impact your chances of owning a home.

‘The Bank of Mom and Dad’ Helps Fund Down Payments

In recent years, an increasing number of first-time homebuyers have relied on financial support from their parents. Approximately 23% of first-time buyers used a gift or loan from friends or family for their down payment, according to the National Association of Realtors. Additionally, Zillow’s chief economist Skylar Olsen revealed that 40% of first-time homebuyers use funds from the “bank of mom and dad” to make their down payments. This financial assistance can come in the form of savings or gifts from family and friends.

The Lack of Affordable Housing Keeps Gen Zers at Home

The high cost of housing has made it challenging for many young adults, particularly those from Generation Z (born in 1996 or later), to afford their own homes. A report by Intuit Credit Karma found that 31% of adult Gen Zers live with their parents or family members because they cannot afford to buy or rent their own place. The lack of affordable housing options has led to an increase in multigenerational living arrangements. Living with parents can help young people build savings and work towards homeownership. However, those with parents who are not homeowners face additional difficulties, as renting households often have limitations on accommodating more individuals.

Having Homeowner Parents Gives You a Head Start

Research conducted by the Urban Institute reveals that young adults with homeowner parents have a higher likelihood of becoming homeowners themselves. This is because they gain valuable knowledge about the mortgage application process directly from their parents. The parents’ expertise and encouragement play a significant role in motivating their children to pursue homeownership. In fact, the study found that having homeowner parents can be equivalent to a 5 percentage point advantage when it comes to achieving homeownership.

Cultural factors also play a role in shaping a person’s attitude towards homeownership. If someone grew up with homeowner parents, they are more likely to have a strong desire to attain the same status due to firsthand experience of the benefits. On the other hand, parents who are renters may not promote homeownership as enthusiastically.

Ultimately, the intergenerational transmission of homeownership status impacts the likelihood of individuals becoming homeowners. Parental homeownership provides financial support, shared living arrangements, and valuable knowledge about the housing market. These advantages can significantly impact a person’s ability to enter the housing market and achieve their goal of becoming a homeowner.

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