Illiquid Homeownership and the Bank of Mom and Dad

Eirik E. Brandsaas
Additional contact information
Eirik E. Brandsaas: https://www.federalreserve.gov/econres/eirik-e-brandsaas.htm

No 2025-094, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Housing is the largest asset in U.S. household portfolios, and first-time homebuyers increasingly rely on parental transfers. This paper quantifies the contribution of parental transfers to the homeownership rate of young households. I build and estimate a life-cycle overlapping generations model with housing, where adult children and parents interact without commitment. I find that parental transfers account for 13 percentage points (27%) of young households' homeownership. Transfers from wealthy parents not only help households overcome borrowing constraints, but also help sustain homeownership, mitigating the drawbacks of illiquidity. Surprisingly, policies lowering entry barriers to homeownership generally increase the reliance on parental wealth, whereas increased liquidity reduces it. Finally, I show that children of wealthy parents strategically use the illiquidity of housing as a commitment device to encourage transfers, resulting in a preference for illiquidity.

Keywords: Homeownership; Parental transfers; Altruism; Life-cycle models (search for similar items in EconPapers)
JEL-codes: D14 D15 E21 G51 R21 (search for similar items in EconPapers)
Pages: 67 p.
Date: 2025-09-30
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.federalreserve.gov/econres/feds/files/2025094pap.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2025-94

DOI: 10.17016/FEDS.2025.094

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().