Mom-and-Dad Banks Step Up Aid to First-Time Home Buyers

[xchrom]

http://www.bloomberg.com/news/2014-09-19/mom-and-dad-banks-step-up-aid-to-first-time-home-buyers.html

The Bank of Mom and Dad is playing a growing role as lender of last resort for a housing recovery struggling to provide more traction for the U.S. economy.

Last year, 27 percent of those purchasing a home for the first time received a cash gift from relatives or friends to come up with a down payment, according to data from the National Association of Realtors. That’s up from 24 percent in 2012 and matches the highest share since the group began keeping records in 2009.

Those numbers will probably keep growing this year as younger Americans remain constrained by student debt, tough entry into the job market and stricter mortgage-lending rules that require more cash up front. At the same time, rising stock and property values give their baby boomer parents the ability to assist those wanting to lock in near record-low borrowing costs.

“Without them, the recovery’s not sustainable,” said Anika Khan, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. Anything that gets more money into first-time buyers’ hands “just moves the housing recovery along,” she said.

[dixiegrrrrl]

1. If people cannot afford a down payment

how can they afford the mortgage, since they are " constrained by student debt, tough entry into the job market"?

I remember we had such a good "housing recovery" right up to the housing collapse,
and that Bernanke assured everyone that the initial cracks in the housing collapse were "limited to sub-prime loans".
Except they weren't. .

Now this Khan person in teh article is admitting...the only way the recover is sustainable is if people are given down payment money.

[pnwmom]

2. If they can afford a rent they can afford a house payment -- and sometimes save money,

because you can deduct interest, which is almost the whole payment in the first decade.

It's important not to pay too much to buy a house, obviously. But a house payment isn't necessarily any higher than rent. And you can also rent out space in a house. A relative has a house in a college community with a basement apartment that pays for half the mortgage payment.