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‘The Bank Of Mom And Dad’ Helps Keep The American Dream Of Home Ownership Afloat

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Written by Christopher Cox

From Forbes Magazine

Many young people can’t afford to buy their own homes. Yet, there was a time when people graduating from college could hold a reasonable expectation of home ownership. Since the bottom fell out of the housing market in 2009, home prices have been steadily increasing to a point where this expectation has become unrealistic.  According to U.S. Census Bureau, home ownership rates for all age groups were lower in 2017 than in 2006, the year before the Great Recession; householders between 35 and 44 years of age showed rates 10 percentage points lower in 2017 than in 2006. Concurrently, the stagnation of wages in the U.S. over the last generation has told a bleak story, according to the Economic Policy Institute. Since 1979, while productivity has grown by 75 percent, the hourly median wage has grown less than 10 percent in real dollars, or an average annual raise of barely 4 cents per hour.

Against these formidable odds, however, some young people are actually doing it. How are they managing? We commissioned an economics consultancy to find out. We wanted to chart the unacknowledged, hard to detect, invisible financing that is keeping the dream of home ownership alive.

Enter The Bank of Mom and Dad—a force that, in the housing market, is roughly akin to bridge financing on a massive-yet-personal scale. We found out that last year, American parents and other family members and friends spent $47 billion helping their loved ones purchase $317 billion worth of homes.  If the Bank of Mom and Dad were an actual financial institution, it would be the equivalent of the seventh largest mortgage lender in the U.S.  Across the U.S., and across demographics, 20 percent of homeowners said they had received help from family and friends in order to buy the home they currently live in. Scaling that number up, this means that in 2018, family and friends helped in the purchase of 1.2 million homes.
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About the author

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Christopher Cox

Christopher G. Cox has over 20 years of experience in the real estate and finance industries. He has understands the complexities and diversity of the real estate market, and he has a passion of helping people realize the American Dream.