Before the housing bust, saving wasn’t a major priority for Bay Area young professionals. Not only, to the chagrin of Suze Orman, were we in a society and era that promoted mass consumption, buying a home was so much more expensive than renting that there wasn’t a huge incentive to save.
Enter the housing bust beginning in 2007 and the rapid decline in home prices and interest rates. Suddenly, especially in many East Bay cities, buying a home became much more affordable. Deals were all over the place but the Bay’s young professionals were at varying levels of preparedness. Most simply hadn’t lived a lifestyle that prioritized saving for a down payment and closing costs. Others hadn’t had enough time working (or enough raises) to save while managing school debt and the Bay’s cost of living. Still others hadn’t fully overcome the credit issues from their youthful transgressions.
No matter what, there was little doubt that with the ability to buy a home with monthly payments that would be equal to or less than what they were paying in rent, now was the time to buy a home. At first, the market was slow and sellers (especially bank owners) were willing to give credits to buyers for their closing costs. Also, the law was allowing sellers to provide buyers with a gift for their down payment. This was all great; buyers were able to buy a home without having had to save for years.
That changed as competition on homes increased and it became a seller’s market. Buyers asking for credits were easily beat by cash buyers or buyers who could buy without asking for concessions. To make it even harder for buyers, the government banned down payment gifts from sellers and reduced the amount of money that sellers could credit to buyers for their closing costs. Lenders also became much more conservative, requiring evidence of reserves or evidence that the buyer had money over and above the amount required for the down payment and closing costs. Enter Mom and Dad.
Not everyone will have parents who are willing or able to help them. Even if they are able, some parents have more to give than others while other parents will be reluctant (even they offered the help in the first place) or will require repayment. No matter how much or little they give or what stipulations come with the offers, many first time buyers would not have been able to buy without their parents help. It doesn’t have to be Mother’s Day, Father’s Day or a birthday to express appreciation to all of the parents, friends and relatives who have helped us buy when we would not have otherwise been able.