Why You Should Consider Helping
Your Kids Buy Their First Home
If you have adult children who are currently renting, but have struggled to buy a home, now may be the time to jump in and lend a hand. With pricing settling down and inventory ticking up, there is a new crop of opportunities in the marketplace.
Here are five reasons why you should consider helping your kids achieve homeownership now:
1. Rental Rates Keep Increasing
Phoenix led the nation in rent increases last year with a 30% increase in the price of apartment rentals and a 20% increase in the price of single-family rentals. Rents are expected to continue rising as much as another 20% this year. By the way, this is not a new problem – rental rates increased 80% between 2016 and 2021.
2. Your Kids Won’t Have to Live with You
Rents have increased so rapidly that many adult children have had to move back home – often with their spouses and children in tow. While this may be fine for a transition period, this can prevent you from downsizing, impact your retirement plans, raise your monthly costs, and create familial stress.
3. Your Grandkids Will Have a Better Future
It is well established that homeownership allows households to build wealth at a significantly greater rate. A National Association of Realtor’s (NAR) study also determined that the children of homeowners have higher educational outcomes, higher levels of achievement in math and reading, and fewer behavioral problems.
4. It’s A Way to Hedge Inflation
While prices continue to rise, locking in a fixed monthly purchase price and mortgage rate makes sense as mortgage rates and rental rates continue to rise. Mark Cussen, financial writer at Investopedia notes: “Real estate is one of the time-honored inflation hedges. It’s a tangible asset, and those tend to hold their value when inflation reigns, unlike paper assets. More specifically, as prices rise, so do property values.”
Renters are vulnerable at each lease renewal because in a market of rising rents, they can quickly be priced out and forced to move. Rising rents are also forcing renters to leave their neighborhoods and schools in search of more affordable options, which can come at the price of safety, educational quality, and commute times. Knowing they have stable shelter, allows homeowners to put down roots, build community, and plan for the future.
Many of our clients have helped their children achieve homeownership over the past decades. How did they help? Some of our clients have gifted a portion of the down payment to help their kids get into a home. In fact, 23% of buyers 37 and younger used a gift to purchase their home according to the NAR. In other cases, our clients have co-signed on a loan or purchased a home with cash and then acted as a private lender for their kids.
If you are not prepared to financially assist, you can still provide very valuable guidance to help your kids achieve homeownership. Encourage your kids to meet with a reputable mortgage lender as soon as they start working so they understand what it takes to become a homeowner. Motivate them to save for a downpayment and contribute to their house fund at holidays and birthdays. Setting the example and sharing your journey of homeownership is important, too!
Interested in helping you kids get a foothold in the market? We would be happy to discuss all the options with you, speak with you about market opportunities and share our expertise. Arizona is still primed for strong economic growth in the coming years which will continue to drive today’s affordability crisis for years to come.