The number of young homebuyers leaning on family financial support for down payments has sharply risen, doubling in the past five years, according to a recent report by Redfin.

The survey, conducted by Qualtrics on behalf of Redfin, which included around 3,000 U.S. homeowners and renters, revealed 36% of Gen Z and millennials are leveraging family financial support to bridge the gap created by soaring housing prices.

Additionally, the study showed other financial strategies adopted by these groups: approximately 16% plan to utilize an inheritance for the down payment, while 13% intend to save by living with parents or other family members.

Despite these strategies, the primary approach for accumulating down payment funds remains through direct savings from paychecks, with 60% of respondents adopting this method. Moreover, 39% of young buyers are considering taking on a second job to boost their savings, reflecting the determination among this demographic to achieve homeownership.

Dramatic Shift In Down Payment Strategies Over Five Years

The reliance on family financial support has markedly increased, with young homebuyers twice as likely to use family money for down payments as compared to five years ago.

In 2019, only 18% of millennials reported using cash gifts from family for this purpose, a figure which rose to 23% by 2023.

This shift was largely attributed to the escalating costs of purchasing a home in the U.S., with prices having surged nearly 40% since pre-COVID-19 pandemic and a 7% increase observed in the last year alone.

This inflation, coupled with a low inventory market, has placed additional pressure on young Americans, who also face challenges such as lower wages compared to previous generations, higher levels of student loan debt and the overall impact of inflation on living costs.

The Growing Divide in Homeownership Opportunities

Redfin Chief Economist Daryl Fairweather emphasized the widening gap between potential homeowners with access to family support and those without.

"Nepo-homebuyers have a growing advantage over first-generation homebuyers. Because housing costs have soared so much, many young adults with family money get help from Mom and Dad even when they have jobs and earn a perfectly respectable income," Fairweather remarks.

The reliance on family assistance reflected a deeper issue within the housing market, where affordability continued to be a significant barrier.

Affordability: The Primary Hurdle for Prospective Homebuyers

The survey further identified affordability as the primary obstacle for young individuals hesitant about entering the housing market: 43% of respondents cite the high cost of available homes as a deterrent, followed by difficulties in saving for a down payment (34%), affording mortgage payments (29%) and navigating high mortgage rates (29%).

Additionally, 16% acknowledge the lack of financial support from family or friends as a barrier and 12% need to prioritize paying off student loans before considering a home purchase.

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