New Jersey’s struggling housing market and high unemployment rate among the 25- to 34-year-old set have driven those who want to fulfill the American dream of homeownership to the wallets of their parents and grandparents.
And with New Jersey tops in the nation for the highest average home down payment, according to data released by LendingTree, it’s no question why approximately one in five baby boomers have gifted money or co-signed a loan for their child or grandchild’s down payment on a home.
According to Jeffrey Otteau, president of Otteau Valuation Group, in East Brunswick, the expiration of last year’s homebuyer tax credits, tighter lending standards and low employment — compounded by boomers who put off retirement for 10 or more years — have had the greatest negative effect on first-time homebuyers, especially those younger than 34.
Despite an increasing number of buyers who can’t afford a first home without help from mom and dad, Rutgers University urban planning and policy development program director Robert Burchell, himself a boomer, said both parties can benefit when parents give money to their children for a down payment.
“If I didn’t give my son the $5,000 he needed 10 years ago to buy his first home — which ultimately allowed him to purchase two more homes on his own — then he would have needed $100,000 as a down payment for the house his lives in now, or else he would still be renting,” Burchell said. “I may have to give him a subsequent $10,000 to help him move to a better home for his family in the future, but knowing he can hold his own with finances otherwise — thanks to that initial $5,000 — is a huge payoff for both of us.”
Burchell’s decision is common in New Jersey. According to a recent survey by Better Homes and Gardens Real Estate, adults over the age of 45 with at least one child or grandchild older than 18 are most interested in giving money to their children, and least interested in co-signing a loan. More than two-thirds of boomers surveyed said they are willing to provide financial support for a down payment on their child’s first home, and those who had already provided funding are most confident they will do so again.
“The American dream is becoming more unattainable for those (ages) 18 to 34, who could very well have been first-time homebuyers in the past,” Otteau said. “But those with help from baby boomer parents still have a chance.”