Buying A Home With A Friend Or Family Member Is On The Rise, According To Zillow
People are getting tired of the never-ending renting cycle and want to start investing in property that is theirs to design, decorate, and renovate. Owning a home is often something one dreams of and works toward most of their young-adult life. However, we've all been made painfully aware of how high mortgages and interest rates have gotten within the last year alone. As noted by Freddie Mac, mortgages have doubled since the beginning of 2022, and interest rates have seen the quickest spike since the very early 1980s. The average weekly mortgage in the United States increased by 3.85% from 2021 and was sitting at 6.94% at the end of October 2022.
Even with this gloomy outlook on the current housing market, Zillow expects it to stabilize this year and sees a trending solution that millennials and Gen Zers are looking toward. 2023 is a year of independence and self-prioritization that has these generations buying homes with friends and relatives who aren't spouses or partners.
Co-buying with friends and family
Zillow has reported seeing the decision to purchase a home with friends and family on the rise as people look for more affordable options in a current market with extremely high prices. In a survey taken in the spring of 2022, Zillow found that 18% of home purchases over the past year were made with a friend or family member who wasn't a significant other. It also discovered that 19% of potential buyers had intentions of co-buying with a friend or relative.
The housing market is progressively becoming less and less affordable for the middle class. Per Zillow, mortgage payment requirements for the average U.S. home median income rose by 10% from January to October 2022, going from 27% to 37%.
Speaking to NBC News, Daryl Fairweather, chief economist at Redfin, points to a "really difficult" housing market to explain the recent co-buying trend. "We built fewer homes in the last decade than we did any decade going back to the 1960s. It makes it really hard to do things like plan those next steps in life, like starting a family, when you can't even get past the barrier of homeownership."
Things to consider when co-buying
Purchasing a home with friends and family is becoming common because of its benefits. According to Rocket Mortgage, co-buying can save you thousands of dollars in first-time homeowner expenses and offers an easier path to meeting credit score requirements. But, even with the perks that prompt these decisions, it's essential to understand the complexities of investing in property with someone else. In the most overstated advice, be sure you're entering this agreement with someone you can trust. And even when you know this person is the right one to take this leap with, always have formally written and lawful arrangements made.
Rocket Mortgage reminds us that the friends and family you co-buy with will directly impact your credit and monthly mortgage payments. Your credit will suffer or excel alongside whomever you're buying with. There are so many small and finite details to discuss beforehand with your partner, from shares to property inheritance. Ask yourself if you guys have the same style preferences and remodeling desires. Figure out the big things that you can see eye to eye on and how to compromise on the things you don't. Buying a home with friends and relatives is an excellent option for many and will prove to be a smart move on the chess board if all the fine details are sorted out beforehand.