As the fall buying season is in full swing, prospective homebuyers are facing affordability challenges due to mortgage rates nearing 8%. This has led some adults to move back in with their parents while they save for a home. According to Realtor.com's executive news editor, Clare Trapasso, while financial assistance from family members to help with home purchases is not uncommon, there is an increasing trend of prospective buyers taking it a step further.
Research conducted by Realtor.com and Censuswide reveals that half of those surveyed who plan to buy a home within the next 12 months are potentially looking to their parents for help in preparing for the purchase. Additionally, nearly one-third say they have already moved in with their parents to save money, and another quarter say they would consider doing so.
The limited savings potential of prospective homebuyers in recent years can be attributed to climbing rents and inflation, as stated by Realtor.com economic research analyst Hannah Jones. These factors have prompted hopeful buyers to seek out creative solutions to achieve homeownership, including turning to family members who have extra space, lower expenses, and the desire to help.
The amount of money these adults who are staying with their parents are able to save varies depending on location and specific arrangements. Jones suggests that assuming they are not required to pay rent, one year of living with family could save buyers over $20,000 in rent. While this alone may not be enough for a down payment on a median-priced U.S. home, it can contribute to boosting existing savings.
Rent prices have remained close to 25% higher than pre-pandemic times, making it challenging to save for a home purchase, especially with home prices more than 35% higher than pre-pandemic levels. Additionally, mortgage rates reached a multi-decade high in October, further increasing the monthly cost of financing a home purchase.
In order to mitigate these challenges, homebuyers can consider saving for a larger down payment or purchasing a lower-priced home to minimize the size of their loan and offset the impact of high mortgage rates. However, the monthly cost of homeownership remains a barrier for many potential buyers.
Overall, the combination of high mortgage rates, elevated home prices, and increasing rent costs has made it difficult for prospective homebuyers to save for a down payment and afford a home. This has resulted in a growing number of adults moving back in with their parents as they seek creative solutions to achieve homeownership.