Nearly a third of first-time buyers receive down payment assistance from a relative or friend to buy a home, according to a report released Thursday from the National Association of Realtors.
The 1.4 million-member trade group’s 2020 Downpayment Expectations & Hurdles to Homeownership report compiled three different surveys to gather the down payment expectations of U.S. homebuyers, consumers and NAR members. Survey research firm TechnoMetrica Market Intelligence conducted the first two surveys and NAR conducted the third.
The first survey, conducted in July 2019, gathered 5,870 responses from U.S. homebuyers who had purchased a primary residence between July 2018 and June 2019. The survey found that during that period the median down payment was 12 percent for all buyers, six percent for first-time buyers and 16 percent for repeat buyers. By contrast, 30 years earlier (in 1989) the median down payment was 20 percent for all buyers, 10 percent for first-timers and 23 percent for repeat buyers.
In 2019, 16 percent of all buyers bought with down payment help in the form of a gift or loan from a friend or relative. That figure goes up to 32 percent for first time buyers and goes down to eight percent for repeat buyers. Between 2000 and 2019, the share of first-timers buying with the help of someone they knew was at a low of 27 percent in 2000 and peaked at 36 percent in 2010, staying between 29 percent and 33 percent ever since then.
More than a quarter of first-time buyers, 26 percent, said saving for a down payment was the most difficult task in the homebuying process compared to only seven percent of repeat buyers. Thirteen percent of buyers overall thought that was the hardest part.
Student loans were the expense most buyers cited as hampering their ability to save for a down payment, followed by credit card debt and car loans.
The second survey, on consumer down payment expectations, is based on 2,710 completed telephone interviews conducted April through June 2019, including cell phones and land lines. The monthly results have a margin of error plus or minus 3.3 percentage points.
The amount consumers expected to have to bring to the table for a down payment varied quite a bit. More than a third, 35 percent, expected to need between 16 percent and 20 percent to buy a home today. Just over a fifth, 21 percent, expected to need a down payment between 6 percent and 10 percent while 11 percent expected to need between zero and a five percent down payment. Nineteen percent said they were not sure how much they would need.
Twenty-one percent of consumers said they had helped a child or family member with a down payment, most of them homeowners themselves. Members of the Silent Generation and older boomers were the most likely to say they had a helped a family member with a down payment: 34 percent and 31 percent, respectively.
Similarly, 21 percent of homeowners said they had received down payment assistance from a parent or other relative. That figure goes up to 24 percent for millennial homeowners, who were the most likely to have received help.
Limited income was the most cited factor holding back non-homeowners from saving for a down payment, impacting 32 percent of non-owners overall and 40 percent of millennials. Millennials were also the most likely to be hit by rising rents, student loan debt, and childcare costs.
The third survey gathered 6,635 useable responses from Realtors with a margin of error plus-or-minus 1.2 percent. The vast majority of Realtors (82 percent) said their buyer clients who were ready to buy were informed on down payments, while 70 percent said they were informed on closing costs. Nearly two-thirds of NAR members, 65 percent, said they’ve had clients in the last five years who received down payment assistance from a parent or other relative. Another 22 percent said they hadn’t and 14 percent said they didn’t know.