The “nepo baby” discussion has found its way to the world of real estate.
Recent findings from the brokerage Redfin reveal that a significant portion of young homebuyers used family money to afford a down payment for a home.
“It seems like the only way to kind of get your foot in the door to the housing market is to have some help,” Daryl Fairweather, Redfin’s chief economist, told Fortune — referring to those who use their inheritance or other family-related money to buy property as “nepo-homebuyers.”
According to Redfin’s survey of more than 500 buyers under 30 years old, 38% had financial assistance from relatives for their down payment.
The situation is significantly a result of the current crisis of housing unaffordability, especially as inflation keeps its grip tight on the American economy.
Redfin further found that today’s first-time buyers need to earn 13% more than they did just a year ago in order to afford a typical US starter home.
“If you’re trying to get into the housing market, and because of how high interest rates are, because of how high home prices are, you have to be like the exception to the rule in terms of your earnings to get into the housing market if you don’t come with cash,” Fairweather further explained to Fortune, adding that the problem quickly becomes generational as a result of nepo owners building better equity by buying younger.
“It really kind of turns into a snowball effect, where the people who are getting help, the earliest, end up accumulating even more wealth, and it further solidifies that divide between the haves and the have-nots and perpetuates intergenerational wealth inequality,” said Fairweather, who is herself a nepo-homebuyer. She purchased her first home at age 27, in 2015, with the proceeds from her mother’s condo sale.
(Her mother was experiencing health problems and couldn’t live alone, so the two moved in together.)
That first home “allowed me to build equity, which I eventually used to buy a home for my mother to reside in when she was able to live independently again,” Fairweather adds in an article in Forbes.
