In today's challenging housing market, a significant number of millennials and Gen Zers are turning to their parents for financial assistance when it comes to purchasing a home. According to a recent survey commissioned by Redfin, over one-third of these younger generations planning to buy a home expect their parents or family to contribute a cash gift towards their down payment.

The Redfin survey also revealed that if not cash, the younger generations are exploring other options like utilizing their inheritance or living with family members to save money for their down payment. The data further shows that these younger individuals are twice as likely to seek financial support from their parents for a down payment compared to five years ago.

During the pandemic-induced housing boom, home prices skyrocketed, and mortgage rates followed suit. Redfin's calculations indicate that since the start of the pandemic, home prices have surged by almost 40%, and in the last year alone, there has been a 7% increase due to limited supply. As of the fourth quarter of last year, the median sales price for houses in the country reached $417,700.

Daryl Fairweather, Redfin's chief economist, noted that the substantial rise in housing costs has led many young adults with decent incomes to seek assistance from their parents. Last year, Redfin conducted a survey among recent movers and found that 38% of buyers under the age of 30 used either a cash gift from a family member or an inheritance for their down payment. Fairweather coined the term "nepo homebuyers" to describe this phenomenon, highlighting the reliance on family support in the housing market.

To illustrate the financial challenges faced by young homebuyers, consider the average home value in Los Angeles, reaching an astounding $953,501. A 20% down payment would amount to $190,700, while a 10% down payment stands at $95,350. In comparison, the median household income in the city is $76,244, making it difficult for many to save a significant down payment. Even in more affordable cities like Austin, where the average home value is $533,719, a 20% down payment still translates to $106,744.

Daryl Fairweather also shares her personal experience as a nepo homebuyer, revealing that her mother provided the necessary funds for her down payment when she was 27 years old. Without her mother's help, she believes it would have taken her years to afford a home. This serves as a testament to the role family support plays in enabling homeownership, especially in the face of rising prices.

Notably, even renowned real estate figure Barbara Corcoran, a self-made millionaire and a prominent personality on Shark Tank, has emphasized the importance of seeking parental assistance to purchase a home. She candidly advises younger individuals to approach their parents for help, acknowledging that homeownership in cities like New York is often unattainable without family support.

While it is evident that parents are stepping in to assist their adult children in the housing market, it's crucial to recognize that not every family can afford to provide such financial support. Fairweather points out that this poses a significant problem, as those without family resources are often unable to achieve homeownership despite having a decent income. The lack of access to family assistance exacerbates the existing generational disadvantage, making both class mobility and the dream of homeownership harder to attain.

In the midst of skyrocketing housing costs, the reliance on parental assistance highlights the challenges faced by younger generations. As the housing affordability crisis continues, it becomes increasingly apparent that addressing the barriers to homeownership is essential to ensuring equal opportunities for all.