When kids get help from parents to buy homes

Last summer, after years of bouncing from rental to rental, Ms Brianna Racoosin bought her dream home, a sunny two-bedroom condominium in Brooklyn.

- Anna Fixsen

(PHOTO: BLOOMBERG)

To cover the US$1.1 million (S$1.4 million) price tag, Ms Racoosin, an art teacher at a public high school, didn’t take out a mortgage; she paid in cash, thanks to a trust set up by her parents.

“I never thought that I would use the money to buy until I had a partner or a family,’ she said. “But then I was like, what’s the point of waiting?”

While generational wealth may be a subject of contempt, and envy, Ms Racoosin, 30, is far from alone when it comes to relying on family money to get a leg-up in the housing market.

About one in five Gen Z and millennial home buyers in the US relied on gifts from family to help with down payments, according to a study released by Redfin.

Ms Danielle Nazinitsky, an agent with Decode Real Estate who worked with Ms Racoosin: “A lot of people don’t want to talk about gifting, even though everyone has help.”

In a historically tight housing market, parental support can help put home ownership within reach. Still, there’s a lot to consider before you turn to the bank of mum and dad. Here’s what you need to know.

A perfect storm of factors is making it especially difficult for prospective home owners in the millennial and Gen Z age groups to buy using entirely their own means.

“It’s the trifecta of high rates, high prices and rising insurance costs, which just makes it really hard for somebody when they’re starting out,” said Mr Bill Banfield, chief business officer of Rocket. “And this is all exacerbated by lower inventory levels.”

Ms Glennda Baker, a real estate broker, wrote in an email that there was “fierce competition” for first-time buyers in her area and in other markets.

“More than 30 per cent of our first-time homes are being gobbled up by private equity and hedge fund buyers,” she said.