Parents pass a lot of traits on to their children: perhaps their eye color, an affinity for a particular sport or hobby, and maybe even their work ethic. However, now there is evidence that parents also pass another trait on to their grown children: their odds of homeownership.
“Whether your parents are homeowners influences whether you’ll be a homeowner,” the researchers said. Furthermore, “your parents’ wealth influences your future homeownership status.”
And the difference isn’t subtle.
The likelihood of being a homeowners increases 8.4 percentage points for millennials whose parents own homes when controlling for race, education level, and incomes. Without controlling for such factors, the gap widens to 17 percentage points.
For the millennial generation, the homeownership rate for those whose parents are homeowners is 31.7 percent. Among those whose parents are renters, the rate is just 14.4 percent, according to the research.
When it comes to wealth, a 1 percentage point increase in parental wealth correlates to a 0.009 percentage point increase in the likelihood of a young American owning a home.
For millennials whose parents have less than $10,000 in net worth, the rate is 14.14 percent. For those whose parents have $300,000 in net worth, the homeownership rate is 36.39 percent.
While the researchers said they “don’t know exactly how homeownership or wealth affects adolescents,” they suggested this influence is important. When it comes to owning a home, there exists a growing gap between different races in the United States “even as our nation becomes increasingly diverse.” This new evidence of a generational link suggests this gap will widen over time.
Among young Americans, white households have a 37 percent homeownership rate. The rate is 27 percent for Asians, 25 percent for Hispanics, and 13 percent among black millennials.
White parents have a homeownership rate of 84 percent, while homeownership among Hispanic parents is 64 percent. Black parents have a 48 percent homeownership rate.
Wealth is also lower among minority families than for white families. The research found the median net wealth for white parents of millennials was $171,000. For Hispanic parents, the median net wealth was $20,700, and for black families, the median net wealth was $17,600.
“Our results provide strong evidence that the intergenerational transfer of homeownership and wealth reinforce and exacerbate existing gaps,” the researchers stated.
As a policy center, the institute suggests, “We need to better understand how this inheritance factor works so we can craft policies that will slow if not reverse widening gaps in prosperity.”
Learn more about millennials and homeownership at the MReport Webinar titled Hottest Buyers on the Block: Reaching Millennials. Click below to register for this event.