Parental Opportunities

Children of homeowners are more likely to become homeowners than children of renters, even as younger renters are coming late to homeownership. Such is the conclusion of a 16-year study by the Urban Institute that looks into homeownership across multiple generations.

The study finds that having a homeowning parent increases a young adult’s likelihood of being a homeowner by 7 to 8 percent. Parental wealth also has an effect. According to the study, for every additional 1 percent of parents' wealth, the chances of their children owning a home themselves ticks up as much as two-tenths of a percent. Young adults are more likely to be homeowners if their parents' wealth is above $200,000.

“The impact of parental wealth is also higher in low-cost cities where housing is more affordable,” the report stated. “Young adults in high-cost cities are also more likely to be homeowners if their parents have greater wealth.”

However, a big factor in whether Millennials enter the market seems to be the financial crisis from a decade ago. According to the report, the relationship between parents who own and young adults who own weakened after the housing crisis.

“The crisis may have shifted young adults’ perceptions of homeownership, especially before the economic recovery,” the report stated. “The influence of parental wealth on a young adult’s homeownership became slightly stronger post-crisis, probably reflecting the tighter borrowing constraints.”

The report suggests that a parent's wealth can be a major factor in younger homeownership, as a parent typically helps a young adult with a downpayment. Ironically, though, this dynamic might better help less wealthy parents in less expensive cities.

“For the lower income group, parental wealth transfers may not be enough to help the child to obtain a mortgage. The high-income group will rely less on parental support, as they are likely to have enough financial resources to access homeownership independently.

Whatever has caused it, Urban Institute found that young adults are delaying the transition to homeownership.

“Millennials ages 18 and 34 are 7 to 8 percentage points less likely to be homeowners than Gen Xers and baby boomers at the same age,” the report stated.