The role of parental financial assistance in the transition to homeownership by young adults

Hyojung Lee, Dowell Myers, Johanna Thunell, Julie Zissimopoulos

This study examines the role of direct parental assistance in their adult children's home buying, net of other resources. Past research has cited the importance of down payment constraints, but often has not included data on parental wealth and direct transfers. Using both the Health and Retirement Survey (HRS) and Panel Study of Income Dynamics (PSID), we first confirm other research that children whose parents have more resources are more likely to buy homes themselves. In addition, we find that financial transfers increase the probability of home buying among adult children, net of parental wealth and other characteristics of parents and children. Results from the HRS suggest that receiving a transfer greater than $5000 for any purpose increases the probability of transitioning to homeownership by 15.1%. Results from the PSID suggest that this effect was magnified after the recession.