A “For Sale” sign in Arlington, Virginia, on Aug. 22, 2023.<\/p>\n
Andrew Caballero-Reynolds | AFP | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
Fewer people can afford to buy a house<\/a> these days.<\/p>\n On top of soaring home prices<\/a>, 30-year fixed mortgage rates<\/a> have been hovering near the highest level in more than two decades.<\/p>\n “U.S. home prices are near record highs, and mortgage rates have rocketed to their loftiest levels since 2000,” said Bankrate analyst Jeff Ostrowski. “For today’s would-be homebuyers, times are decidedly tough. They face limited choices and an affordability squeeze.”\u00a0<\/p>\n For some buyers, that leaves just one option: asking their parents for help.<\/p>\n<\/div>\n “First-time buyers cobble together down payment sources from at least two places,” Zillow’s chief economist Skylar Olsen recently said on CNBC’s “Last Call.”<\/p>\n “Some of that is hard-won savings,” she said. “The other part is, say, a gift from family and friends.”<\/p>\n In fact, roughly 40% tap the bank of mom and dad, up from only one-third pre-pandemic, Zillow found. “That’s a pretty privileged network,” Olsen added.\u00a0<\/p>\n More from Personal Finance:<\/strong> Would-be homebuyers need\u00a0a salary of $114,627<\/a>\u00a0to afford a median-priced house in the U.S., according to another\u00a0report<\/a>\u00a0by real estate site Redfin, a particularly high bar for those just starting out<\/a>.<\/p>\n To bridge the gap, a growing share of younger house hunters are now considered “nepo-homebuyers,” because they rely on family money to complete their purchase, the\u00a0Redfin<\/a>\u00a0report said.<\/p>\n Nearly 40% of recent homebuyers under age 30 used either a cash gift from a family member or an inheritance to afford their down payment, Redfin also found.<\/p>\n<\/div>\n Despite being the hallmark of the American Dream, close to three-fourths of would-be homeowners said affordability is their greatest obstacle, a recent report by Bankrate found<\/a>.<\/p>\n In fact, housing\u00a0is far less\u00a0affordable\u00a0today\u00a0than in any time in recent history, several studies show<\/a>.<\/p>\n<\/div>\n Over the past 35 years, the payment-to-income ratio \u2014 a commonly used measure of the share of median income it takes to make the monthly principal and interest payment on the median home with a 30-year mortgage and 20% down \u2014 has averaged less than 25%, according to data from\u00a0ICE Mortgage\u00a0Technology.<\/p>\n At its peak in 2006 before the crash, the payment-to-income ratio was 34%. In late 2023, the payment-to-income ratio is 40%.<\/p>\n<\/div>\n Often, it’s the down payment that seems particularly daunting.<\/p>\n However, there are options, noted LendingTree’s senior economist Jacob Channel. “Though they are important, buyers should remember that a down payment isn’t everything, and, even if you don’t have tens of thousands of dollars you can put toward one, that doesn’t mean that you won’t be able to buy a house.”<\/p>\n While a 20% down payment is still considered the standard<\/a>, the federal government, states, banks and credit unions all offer programs with much lower down payment requirements, or\u00a0even none at all<\/a>.<\/p>\n “Keep in mind that many lenders and specific loan options, like FHA mortgages, don’t necessarily require particularly large down payments,” Channel said.<\/p>\nBuyers turn to the bank of mom and dad<\/h2>\n
Homeowners say roughly 5% is the magic number to move<\/a>
More unmarried couples are buying homes together<\/a>
Some costly financial surprises for first-time homebuyers<\/a><\/p>\nHome affordability is a growing problem<\/h2>\n
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‘A down payment isn’t everything’<\/h2>\n