Gifts for Home Purchase and Housing Market Behavior

by Gary V. Engelhardt and Christopher J. Mayer
May/June 1994

Rapid increases in house prices can make home ownership more difficult for prospective first-time home buyers by increasing the required down payment amount and, if the increases outpace income growth, by increasing the ratio of mortgage payments to income. In response to such constraints, households may seek a gift or loan from a family member to use as part of the down payment.

Family transfers for housing purchase may be useful in understanding the relationship between housing finance and housing markets. Gifts may play a critical role for some households in home purchase activity in real estate cycles. This article documents the frequency and magnitude of family gifts for housing purchase and explores economic explanations for their role in home financing.

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