The Rise of Family Money in California Real Estate

Family Money Plays Increasing Role in California Real Estate Market

A recent analysis of over 600,000 FHA loans in California has revealed a growing trend – more and more first-time homebuyers are relying on financial assistance from family members to make their down payments. This trend is particularly pronounced in California, where the high cost of housing has made it increasingly difficult for young families to afford a home on their own.

According to the data, in 2011, about one in four FHA loans in California included down payment money from relatives. Today, that number has risen to one in three. In some parts of the state, such as East San Jose, North Hollywood, and South Central Los Angeles, at least half of FHA borrowers are receiving help from family members.

While FHA loans have been declining as a share of California’s overall mortgage market, they still play a significant role in helping first-time buyers get into lower to mid-priced homes. However, the lending limits on FHA loans make them unrealistic for California’s most expensive markets, such as San Francisco and L.A.’s Westside.

For many young buyers, like Brandon Miller, who received financial assistance from his mother to purchase a home in Riverside, this help from family members is essential in achieving the California Dream of homeownership. Miller, a 24-year-old homeowner, expressed gratitude for his family’s support and is committed to maintaining and improving his home.

However, the reliance on family wealth in the real estate market has raised concerns among housing experts. UC Berkeley’s Carolina Reid points out that wealth inequality and homeownership disparities by race and ethnicity can be exacerbated by the need for parental assistance in buying a home. Families that have owned homes for generations have a significant advantage, while others may be forced to leave the state in search of more affordable housing options.

Despite the challenges, for many like Jackie Dillon, a social worker in South Los Angeles, receiving help from family members has been a life-changing opportunity. Dillon, who purchased a home earlier this year with the help of her mother and an inheritance from her grandmother, sees homeownership as a way out of poverty and a means of building a future for her family.

As the California real estate market continues to be shaped by family money, the conversation around homeownership and affordability remains a complex and evolving one. For some, like Stephanie Pavón, who struggles to save for a down payment without family assistance, the dream of owning a home in California may seem out of reach. But for others, like Raphael Leib, who co-bought a house with his wife thanks to help from their parents, homeownership represents stability and a sense of community.

As the debate over housing affordability and access to homeownership continues, the role of family money in the California real estate market is likely to remain a key factor in shaping the future of housing in the state.