Gen Z Relies on Parents to Buy Homes

In their pursuit of home ownership, Gen Z is leaning on their parents to foot the bill.

In a new Intuit Credit Karma report, 38 percent of Gen Z homeowners said they got financial assistance from their parents to purchase their home. And among those who weren’t yet homeowners, 44 percent said they planned to get some financial support from their family to make their home-buying dreams a reality.

Gen Z, which ranges in age from 12 to 27, was also significantly more likely to say they’d split the purchase of a home with someone other than their partner at 59 percent.

“Housing costs have soared these past few years, leaving consumers to grapple with the least affordable housing market we’ve seen in decades,” said Courtney Alev, consumer financial advocate at Credit Karma, in a statement. “As a result, young people are tapping their inner circles to try and make homeownership a reality, whether that’s mom and dad offering to help with a down payment or propositioning their friends to co-buy.”

This comes as the newly young adult generation faces rising rent costs and what can feel like an impossible housing market with skyrocketing prices and mortgage rates.

Altogether, 47 percent of Americans in the study said they feel pessimistic about their finances because of the housing market, and Gen Z and millennials felt this more distinctly at 59 and 55 percent. Gen X said this only 43 percent of the time, and just 35 percent of respondents aged 59 and older said the same.

“Gen Z-ers are, as a whole, in a terrible position to be able to afford a down payment on a home, which makes relying on parents a necessity for many people looking to buy homes,” Katherine Fox, a financial planner and the founder of Sunnybranch Wealth, told Newsweek.

Financial advisors generally recommend spending no more than 30 percent of gross monthly income on housing, but Americans often pay far more. Around one in three Americans said between 31 percent and 60 percent of their income goes to housing, and one in 10 even said 60 percent of their income goes to housing each month.

To get around these costs, some have ditched the idea of having their own place altogether and are living at home with their family. Nationwide, 14 percent of adult Americans live with family, and a whopping 31 percent of Gen Z-ers said they were still living with their parents.

Even among those who have moved out, many don’t see any viable pathway to home ownership. In the Credit Karma survey, 22 percent of Americans said they plan to rent forever.

Fox said the heightened reliance on their moms and dads for homeownership might not necessarily be a bad thing when you consider the broader wealth transfer taking place between Baby Boomers and their millennial and Gen Z children.

“Parents helping their children with a down payment are accelerating this transfer of wealth while they are still alive and using money to help establish their children’s financial security,” Fox said.

Fox said the trend also opens the doors for families to communicate more openly about money and family wealth.

“Gen Z doesn’t only need help buying homes,” Fox said. “They also need to learn the basics of financial education and growing wealth with their long-term financial security in mind.”

Today, the main difference between a Gen Z-er who can afford to buy a home and those who cannot comes down to family wealth, location and income, Fox added.

“Gen Z-ers who make high incomes may be able to buy homes, but many who make high incomes will also live in high cost of living areas, which will reduce their home buying power,” Fox said.

For those without the financial boost from their family, homeownership may be a far-fetched dream, at least in the near future, Laura Adams, a senior real estate analyst at AceableAgent, said.

“Gen Z-ers earning average or lower incomes or without family financial support will likely be forced to postpone buying a home until they can save enough for a downpayment, home prices come down, interest rates decline, or all of the above happen,” Adams told Newsweek.