There are many things that factor into the decision to buy a home. New research from the Urban Institute suggests that one of those things may be inherited from your parents.
Children are More Likely to Own a Home if Their Parents Did
According to an analysis of millennial homeowners, the homeownership rate of those whose parents rent their homes is 14.4%, while the rate amongst millennials whose parents are homeowners is 31.7%!
A young adult’s odds of homeownership are highly correlated with their parent’s homeownership.
Without controlling for such factors as age, income, education, marital status, and race or ethnicity, there is a 17 percentage-point gap between the homeownership rate for young adults whose parents are renters and young adults whose parents are homeowners.”
The study also revealed that as a parent’s net worth increases, so does the likelihood that their child will own a home. These two findings are not surprising as we know from the Survey of Consumer Financesthat a homeowner’s net worth is 44x greater than that of a renter.
So, a parent who is a homeowner will have more wealth which will, in turn, increase the chances that their children will own their own homes in the future.
Below is a breakdown of the relationship between a parent’s wealth and a millennial’s likelihood to own a home.
The Good News: The high homeownership rate amongst baby boomers (likely the parents of many millennials) is a great sign that millennials will want to own homes. We are already seeing this in the high-demand environment that we are currently experiencing in the starter and trade-up markets.
Even though millennials took longer than many of the generations before them to start home searches of their own, the data shows that they will not be waiting much longer!