How Young Americans Are Funding Down Payments: Family Help and Side Hustles

Rising home prices are fundamentally changing how younger generations afford a down payment. According to a February 2024 survey, over one-third (36%) of Gen Z and millennial prospective homebuyers expect to use a cash gift from family, a rate that has doubled since 2019. This trend underscores the growing financial challenges in the U.S. housing market, where saving independently has become significantly more difficult.

Why Are So Many Young Buyers Turning to Family for Help?

The primary driver is the sharp increase in housing costs. U.S. home prices have risen approximately 40% since before the pandemic, with a 7% increase in the last year alone. When combined with higher mortgage rates and inflation, the financial barrier to entry is substantial. For many young adults, wages have not kept pace with these rising costs, and many carry significant student loan debt. Receiving financial help for a down payment—the initial upfront payment made when purchasing a home—is often necessary to bridge the affordability gap. This creates a distinct advantage for buyers with access to family wealth.

What Are the Most Common Down Payment Strategies?

Beyond family assistance, young Americans are employing multiple methods to save. The survey revealed that:

• 60% plan to save directly from their primary paycheck.
• 39% are likely to work a second job to earn extra income.
• 16% expect to use an inheritance.
• 13% plan to live with family to reduce expenses and save more aggressively.

This multi-pronged approach highlights the extensive effort required to accumulate savings in the current economic climate.

What Are the Biggest Barriers to Homeownership?

For those not planning to buy soon, affordability is the overwhelming obstacle. The survey identified the top barriers as:

1. Homes on the market are too expensive (43%).
2. Inability to save for a down payment (34%).
3. Inability to afford monthly mortgage payments (29%).
4. High mortgage rates (29%).

Notably, 16% of young Americans cited a lack of financial support from family or friends as a specific reason they are unlikely to purchase a home, highlighting the growing divide between what some industry commentators call "nepo-homebuyers" and first-generation homebuyers.

Practical Advice for Prospective Buyers

Begin by getting a clear picture of your finances. Review your credit score and debt-to-income ratio, as these directly impact your mortgage eligibility and interest rate. Explore all available down payment assistance programs, including state and local first-time homebuyer grants. Consider alternative paths to ownership, such as buying a multi-unit property where rental income can help offset the mortgage. Based on our experience assessment, creating a detailed savings plan and exploring a variety of financing options can improve your chances of success, even in a challenging market.