Last year, at age 41, Carmichael resident Chris Platz achieved a goal he once feared might be impossible.
The nonprofit manager joined fellow Gen Xers and millennials who have managed to hurdle a series of economic obstacles—recession, pandemic and soaring house prices—to finally cross the homeownership threshold. He bought a modest $275,000 condominium.
But he didn’t do it alone.
Kathy Platz, a certified public accountant, not only gifted her son the down payment and went along with him on house visits as his consultant; she’s the one who hit the go button. “Let’s do this,” she texted her son one day last year. “Let’s call the Realtor.”
When Chris signed the purchase papers, mom was there with a celebratory glass of wine. Chris chose a beer for the occasion.
“It was a mother-son thing,” she said. “He was happy, and I was happy for him.”
The warm fuzzies are mutual. “She made it easy,” her son said. “I could not have pulled this off without her. I wouldn’t have known where to start.”
The Platz mom-and-son venture is not unusual.
Home buying around the region has increasingly become a family affair during what has been the wildest Sacramento home real estate market in years. Amid record-setting prices, unprecedented bidding wars and fast-rising mortgage rates, parental help in fact has become the only way for many in their 20s, 30s and even 40s to get that first foot in that first door.
Some parents are gifting their adult children the full down payment. That’s not small change. With the median price of a home in Sacramento County at about $500,000, a traditional 20% down payment amounts to a $100,000 gift.
Some parents are taking it another, riskier step.
With lending criteria tight since the home-loan meltdown of 2008, parents are co-signing loans to help their adult children qualify. That limits their own future borrowing power and puts them directly into the line of fire if their children fail to make the monthly mortgage payments.
Data is limited on how often families chip in to get their children into a first house. It’s not something most families readily talk about. But surveys and interviews suggest family financial help is increasing in frequency and in dollar amount.
A recent California Association of Realtors survey among agents found an estimated 50% increase in family financial help over the past six years. That’s 10% of all purchases.
The percentage on first-time deals is likely much higher. Sacramento-area mortgage broker Nathan Sibbet of loanDepot estimates parents are helping out financially on 25% to 30% of the first-time home purchases he deals with.
“It’s really challenging to buy a house without family help, unless you’ve been working a long time,” Sibbet said. “A lot of folks have the income, but they don’t have the savings to come up with even 10% (down payment).”
The “family affair” approach is not just about money, though. Parents are more involved in the shopping and decision- making process as well, said Erin Stumpf, a broker with Coldwell Banker and president of the Sacramento Association of Realtors.
The Sacramento real estate market has gotten complicated and intimidating. Parents bring experience, some of it from previous hot markets in the early 1990s and 2000s.
In one recent case, mom and dad hired Stumpf and honchoed the house hunting. The adult child, who has a high-paying job, showed up to look at the house before the purchase went through.
“It’s become a team effort,” Stumpf said. “Part of it is the kid is busy with their life and career. The parents are semiretired or retired. They have the time. They have the eagle eye. And the kids trust their judgment.”
Some families are all-in.
One mom is selling her home in Texas to make the down payment on a “multigenerational” home in Sacramento. She will live in the accessory dwelling unit—a granny flat—out back, while her adult child and family—who will own the home—live in the main house.
Another couple is gifting a daughter a whopping 60% down payment on a house near them in a safe neighborhood, their real estate agent said. The daughter is an entry-level worker making less than $50,000 a year who would not otherwise be able to afford the monthly mortgage payment.
It’s not new for family members to help younger generations get into their first home. It’s in fact something of an American tradition, said analyst Rick Sharga, vice president of market intelligence for Irvine-based ATTOM Data Solutions.
But Sharga said parents and adult children are facing a new reality that has made family aid more urgent: For the first time in generations, it’s not a given that the younger generation is going to be better off financially than its parents. Hit by the Great Recession as they entered adulthood, people in their 20s, 30s and 40s struggled for years longer than their parents did to achieve financial stability.
The real estate market didn’t wait for them. It’s been on a decade-long upward price swing. That’s prompted a certain FOMO—fear of missing out—among young adults and their parents.
COVID-19, ironically, may have played a role in increased parent involvement, Sharga said. A huge number of young adults moved back in with parents early in the pandemic, allowing them to save on rent and likely leading to some heart-to-heart conversations around the dinner table about the child’s post-pandemic housing plans.
At the same time, a good number of baby boomers, many now in their 60s, are feeling flush. They are sitting on historic levels of home equity, and their investment accounts have benefited from a 12-year run-up of stock values. The result is that some parents have decided to fast-forward some of their children’s inheritance, Sharga said. “We are seeing that use of intergenerational wealth earlier, not when mom and dad pass away.”
David Tucker, a Silicon Valley retiree and father of two, saw where California real estate was headed a few years ago. He set aside money to help both his children make the down payment.
Thanks to that largesse, his daughter, 29-year-old West Sacramento renter Aralyn Tucker, who works for a nonprofit agency, is about to go shopping for her first home.
“I don’t have the words (to express) my gratitude,” she said. But it led to a difficult moment when she learned down-payment help alone wouldn’t be enough to qualify her for a house in the low $400,000 range, based on a mortgage broker’s review of her finances.
Aralyn learned she would need a co-signer on her loan. That sent her back to her parents. “I was apprehensive about asking,” she said. “I told them, ‘You have already done so much. So I completely understand if you say no.’ But my dad said, ‘Yes, we’ve already talked to our accountant.’”
The decision was easy, her father said. He struggled financially when he was younger. “You want your children’s lives to be easier than yours.
“Both of my kids are responsible. They live within their means. If they were spending every other weekend in Vegas, I wouldn’t want to give them this kind of money. But they’ve earned it, and we can do it.”
Leanna Halldorf, an agent with Guide Real Estate who focuses on first-time buyers, said parental assistance can help buyers avoid getting in “over their heads.”
But she pointed out that young people who do not have family support are at a disadvantage when competing with the combined financial firepower of two generations. “We are seeing people with generational wealth being able to outbid other people who don’t have that help,” Halldorf said.
The dividing line between haves and have-nots has shifted notably during the recent run up in home prices. Now, it’s not necessarily enough to have a single paycheck, even if it’s a healthy one.
Longtime Sacramentan Maya Wallace, 44, makes more than $100,000 as a manager for strategic initiatives with a state agency. But she is still paying $500 a month on student debt, she is single and, unlike some of her friends, her family doesn’t have money to help.
It’s aggravating. Wallace sits on the city planning commission and is a former affordable housing executive and a former arts commissioner, but she feels like she’s on the edge of being locked out of home ownership.
“I feel like, by my age, I should already be in position to buy a home,” Wallace said. “I was here (when prices were low) and helped make this a desirable place to be. I don’t get to partake in that as a homeowner, and that is frustrating.”
She’s been saving money but figures even if she qualifies for a Federal Housing Administration loan, which allows a 3.5% down payment, she can’t compete with people who put 20% down. So she’s talking with a friend about going in together as co-buyers.
“It’s the story of people on the bubble everywhere in America,” Wallace lamented. “I am middle class, without a lot of resources to access.”
Even for families with money, the way forward in the current real estate climate is not easy or clear. Recently, the market has appeared more volatile. Mortgage rates have jumped, increasing monthly payment costs by hundreds of dollars.
Real estate attorney Keith Dunnagan with BPE Law Group in Gold River said FOMO could turn to “oh, no” for many families this year as more parents realize they don’t have the extra money to help their adult children get into a house.
One notable statistical trend line suggests that was already happening last year. The percentage of Sacramento households that could afford to pay the mortgage on a median priced home dropped to 34% earlier this year, the smallest percentage since 2007, according to the California Association of Realtors. (The CAR analysis presumes, by the way, those households had already saved up enough to make a 20% down payment.)
My wife and I are among those 60-something parents who plan to gift our 28-year-old daughter the down payment on a house. For now, our plan is on pause. We’re uncomfortable with market signals this spring. Our daughter, an accountant who has been watching the market, is displeased by the lack of houses available and the bidding wars for them.
It feels like a guessing game. If she were to buy now, she probably would lock in a mortgage loan rate lower than will be available for the foreseeable future. But if we wait, let’s say a year or two, the market may not be as heavily weighted in favor of sellers. And house prices could have plateaued or dropped in a way that might be meaningful.
That would not be unprecedented. Real estate analysts say the huge price drops during the 2007 real estate meltdown were unique and unlikely to happen again. But home prices saw notable dips that lasted for years in the early 1990s as well. Both of those moments gave many people who had been priced out of the market a chance to get in.
The other question potential parental financial helpers face: What’s the smart way to go about this?
Real estate attorney Dunnagan said parents should first do a risk analysis of their own finances. That may involve talking with accountants, attorneys and financial advisers to get a sense of their financial strength and needs.
He and others also said parents should not just give the child the money. Instead, the parent should write a letter to a loan officer stating that the parent plans to offer a down payment gift. Then, the parent should send the money during escrow directly to the title company via cashier’s check or wire transfer.
But even before that, there is a critical first step: The adult child should attempt to qualify for “preapproval” on a loan. That will give child and parent a sense of where the child’s finances stand and how much the parent will need to be involved.
Then there are the interpersonal family questions. First among those: Is the child a good bet as a financial partner? Yes, you love them, said Dunnagan, but he warned if the deal goes bad, “it makes Thanksgiving a little awkward.”
And if parents give substantial help to one child, how does that affect their relationship with their other children?
Chris Platz and his mom are happily past all that.
They got into the market a year ago, feeling they couldn’t wait any longer. The timing was good. Platz recently saw a condo two doors down with a similar floor plan sell for $75,000 more than he paid.
For Kathy Platz, it keeps family close by. Her son and 12-year-old grandson live 10 minutes away. Otherwise, her son could be living 10 states away. She got to help her grandson outfit his room, another warm-fuzzy moment. “Grandma came through with the furniture he wanted,” she said.
It’s given Chris a new goal. He would love someday to be able to do for his son what his mom did for him.
“As a parent, you almost get more joy out of your kid’s happiness than your own.”