California home prices keep going up. So who's buying and how are they affording it. Our California dream collaboration found one answer in federal data. KPC PCCs David Wagner digs into numbers showing buyers are increasingly getting help from mom and dad. This is considered the 1950s Grinch. Unlike a lot of 24 year olds in California Brandon Miller is a homeowner. But he didn't do it on his own. I cannot be in this house without my family's help. Miller's parents gave him about 10000 dollars to help buy this 365 thousand dollar house in Riverside. He now has a nice front yard for his two massive Gray Davis. He's good about watering the plants and he's decorated to highlight the houses mid century feel living here keeps Miller close to his parents. I do everything possible to show that I am grateful for what they did. I keep my house nice I try to improve my house when I can. I want to show that what they invested in is actually going toward something good. Miller shares his house with a few renters. He says it costs him less than renting an apartment and he's building equity. I definitely feel like I was able to achieve the Californian dreams. It's a lot of people nowadays can't afford houses. If you want to buy a house in California today it helps to have parents who can chip in. KP S.C. analyzed data on FHA loans loans. A lot of first time buyers used to get into lower and mid priced homes. We found that in some zip codes these days more than half of buyers are getting money from relatives for their downpayment. Statewide about a third of FHA borrowers are getting family help. That's up from only one in four back in 2011. I saw the prices going higher and higher and I knew that if we didn't help him he would not be able to buy something when he was actually ready to purchase. That's brandon Miller's mom Melanie Gerber. She's also a mortgage loan officer and she sees other parents helping out all the time. I have one that just went into escrow yesterday. They're having money gifted from the family. When Gerber started this job seven years ago she didn't see too many people hitting up their parents. Now she says about half of her borrowers get help. I think appearance just want them to make it on their own and no they can't do it. Median California home prices are now more than double the national average rent and student loans can make it hard to save. So of course parents want to help their kids. They're gifting down payments but also coal buying houses. Some are making all cash purchases and housing experts worry about what this trend means for the state. We have huge wealth inequalities and homeownership inequalities by race and ethnicity. That's UC Berkeley's Carolina read. She says California's existing wealth gaps could get worse if first time buyers increasingly depend on family money. She says many black and Hispanic families today don't have as much wealth to share because in the past they were shut out of homeownership. So who has wealth now and who can bequest that wealth to their children. Is it a direct consequence of our government lending practices 50 years ago but family help isn't just benefiting families that have always been homeowners. This is my living room as soon as you can. Jackie Dillon is a social worker at an L.A. hospital. Her mom an immigrant from Mexico lives with her in this South L.A. home. Dillon bought it earlier this year and we had balloons in here. And we never see my mom cry that she actually shed a tear that day and she was just so happy. I think she fell. I think she is proud of me. Until now they've always rented. Which is why Dillon says buying was such a big deal. I did not want to be renting my entire life and not establishing any wealth and not saving. And so for me it means that we're out of poverty and actually building a future. Savings covered about half of the down payment and closing costs on the 450 thousand dollar house. But she had another source of help. My grandma was the matriarch of our family. Dillon got money after her grandmother's death. Our family has always had very intelligent strong and compassionate women so that to me was just her helping us yet again Dillon says if she kept saving in a few years she might have been able to afford the down payment on her own. But then again in a few years who knows what a house like this will cost. Joining me now is K.P. CC reporter David Wagner. David welcome to the program. Good to be here. Where are we seeing the most family support for first time homebuyers in Southern California. You know it's really high in areas like North Hollywood South Central L.A. Riverside Santa Ana. And if you look in San Diego some of the places that have the most family support are places like Alpine and parts of east county. There's an area you know around South Park and Golden Hill that also has high rates of family support KPC data journalist Erin Mendelson worked with me on this one. And what he was able to do was break down this data on family support by zip code. And so what we found is that last year there were dozens of zip codes throughout California including the areas I just mentioned where at least half of FHA buyers were getting family help with their loans. Across San Diego you know family support is just becoming really more common as it is throughout the state. Back in 2011 only about 20 percent of people in San Diego County were getting family help. Now that's up to over 30 percent across the county. Now you focused on FHA loans for this story but are people also getting family money for other kinds of mortgages. Definitely we see parents helping out their kids in a lot of different ways. So you know they're giving downpayment money for FHA loans but they're also giving downpayment money for conventional mortgages. I interviewed one person for this story who bought a house in L.A. with a conventional mortgage and he got forty thousand dollars in parental help. You know sometimes we see parents co buying houses with their kids. We found a recent report that said in San Jose 48 percent of houses that were recently purchased and 38 percent of homes recently purchased in San Francisco had Kobe Myers. And what that often means is that parents are buying houses with their kids because the kids couldn't afford them on their own. We also know that parents are out there making all cash purchases for their kids. And even within these FHA loans that we're talking about family money can be involved in other ways that aren't picked up by the data we're looking at. You know people can be using trust fund money or inheritances and that might not even show up in the statistics we're talking about. Now you talked with several people who own their houses because of family help. But what about the people who don't have that help. Are they largely priced out of the market. It feels more and more like that to those people yeah. I mean the buyers I interviewed if they didn't have that family money they just felt like saving up for that downpayment is getting more and more impossible and they wonder about their future here in California. I talked to one person who lives in L.A.. Her name is Stephanie Pavone and she and her husband have a 15 month old son. And so they've been looking to buy a house recently. But in their neighborhood now homes are going for a million dollars and even small rundown homes that are smaller than their apartment they start at half a million dollars and they just can't afford to buy a house like that. You know here's how Stephanie Pavone described her situation to me. There are so many people like myself who can't afford to live in a house like this and I do wonder who can. You know we have been considering moving to another state. My sister lives in Texas. We've thought about moving there. Yeah I mean I would love to stay in Los Angeles. I would love to stay in California. I'm wondering what impact do the old racist practices of redlining have on who's able to buy a house in California now. Well yeah and that's one of the big concerns that housing experts have that I spoke to with this you know because everybody I interviewed for this story had their own unique story about getting family help getting into their first home. But if we look more broadly and ask the question whose parents are able to help their kids what we see is across the state. It's tends to be white families because they've had the benefits of generations of home ownership whereas in the past there were policies like redlining where government backed loans were explicitly denied to residents in minority neighborhoods. And this was happening as recently as the 1960s. So you know those kind of families didn't get the benefits of generations of homeownership that make it so that they can pass down tens of thousands of dollars to their kids to get them in a home today. David what's your take away from this story reporting on this story was really interesting to me because it finally put some hard numbers and you know really painted the picture of what I think is kind of an open secret in California which is that so many people who have been buying homes here recently are only able to do it because their parents are chipping in. You know it's just becoming so much harder for normal people to afford the prices that we're seeing these days. And so doing the story really helped put that in perspective and painted a picture of what the real estate market really is like in California. Now you actually created a database where listeners can find out how many of their neighbors received family help for their downpayment. How does that work. KPC data journalist Erin Mendelson did a really great job with this map and if you go to KPP dot org and find the story online you can look at this map and see broken down by zip code how many people in your neighborhood have been tapping into family money to buy their first home. And I've been speaking with K.P. PCC reporter David Wagner. David thank you. Thank you.
When Melanie Gerber started working as a mortgage loan officer in Riverside seven years ago, she didn't see many first-time buyers hitting up their parents for help.
Now she sees it all the time.
"I have one that just went into escrow yesterday," Gerber said. "They're having money gifted from the family."
She estimates about half of her borrowers are now getting money from mom and dad.
"I think the parents just want them to make it on their own and know they can't do it," she said.
Gerber's observations are backed up by federal data. If you want to buy a home in California, it increasingly helps to have relatives who can chip in.
California Real Estate Is Flush With Family Money
KPCC crunched the numbers on more than 600,000 FHA loans, a type of government-backed mortgage that's common with first-time buyers.
FHA borrowers can use money from relatives for their down payment. In recent years, that kind of family financial help has been on the rise in California.
Back in 2011, about one in four FHA loans in California included down payment money from relatives. Today, it's one in three.
Family down payment support is playing an even bigger role in many parts of California, outstripping the national rate of 26 percent.
Last year, in dozens of California ZIP codes — covering parts of East San Jose, North Hollywood, South Central Los Angeles, Santa Ana and Alpine in eastern San Diego County — at least half of FHA borrowers were getting family members to help with the down payment.
Many first-time buyers choose FHA loans for their low down payment options and relaxed credit requirements. FHA loans have been declining as a share of California's overall mortgage market. Still, in 2017 about 15 percent of all homes sold in California had an FHA loan, according to a survey from the California Association of Realtors.
These loans can help young families get into lower to mid-priced California homes. However, lending limits max out at close to $680,000, making FHA loans unrealistic for California's most expensive markets. Very few people use them to buy homes in areas like San Francisco or L.A.'s Westside.
Loan officer Melanie Gerber gave her son nearly $10,000 to get him into a $365,000 house in Riverside.
"I saw the prices going higher and higher. And I knew that if we didn't help him, he would not be able to buy something when he was actually ready to purchase," she said.
Gerber's 24-year-old son Brandon Miller said, "I could not be in this house without my family's help."
Miller has embraced homeownership. His modest ranch house has a nice front yard where his two massive Great Danes can run around. He enjoys watering the plants and looking for mid-century furniture to highlight the house's 1950s charm.
Living here keeps Miller close to his parents.
"I do everything possible to show that I'm grateful for what they did," he said. "I keep my house nice. I try to improve my house when I can. I want to show that what they invested in is actually going toward something good."
Miller shares the house with a few renters, so he can easily cover his portion of the monthly payments. He said it costs him less than renting an apartment. And he's building equity.
"I definitely feel like I was able to achieve the California Dream, since a lot of people nowadays can't afford houses," he said.
Parental Help Takes Many Forms
Median California home prices are now more than double the national average. Student loan debt and unaffordable rents can make it hard to save. When parents see their kids struggling under those pressures, of course they want to help.
And they're not just gifting down payments to their kids. They're also co-buying houses.
A recent quarterly report from Irvine-based real estate data firm Attom Data Solutions found that 48 percent of houses purchased in San Jose had sales deeds that listed multiple non-married buyers (often an indication that parents are co-buying with their children). The same was true for 38 percent of homes purchased in San Francisco.
Some parents are making all-cash purchases for their kids. Family money can be involved in other ways that are harder to detect. Buyers can purchase homes with inheritances or trust fund money, which don't show up in data on FHA loans.
Parental help is happening in many non-FHA loans as well.
Labor union representative Raphael Leib used a conventional mortgage to buy a $390,000 house on the Eastside of Los Angeles three years ago with his wife, a high school French teacher.
The couple is raising their two young children in the three-bedroom house thanks in part to about $40,000 worth of help from their parents.
"Having a gift from both our sets of parents really meant that we could find a place that our family could grow into," Leib said.
Leib has seen others also tapping into generational wealth to buy homes in Los Angeles. He doesn't want to see long-term residents priced out of his City Terrace neighborhood.
"This is a nice neighborhood. The neighbors have been here a long time. I know them all well. They know me well. It's a close-knit community," he said.
"I'd rather not see it be gentrified."
Who Has Wealth To Share?
Housing experts worry about the rising reliance on family wealth in California.
"We have huge wealth inequality and homeownership inequalities by race and ethnicity," said UC Berkeley's Carolina Reid.
Many black and Hispanic families today don't have as much wealth to share as white families, said Reid, because past government policies shut them out of homeownership. As recently as the 1960s, the practice of "redlining" explicitly denied government-backed home loans to residents in minority neighborhoods.
Reid predicts today's wealth gaps will only get worse if first-time buyers increasingly need to have parents who can help.
"Who has wealth now — and who can bequest that wealth to their children — is a direct consequence of our government lending practices 50 years ago," Reid said.
Richard Green, the director of USC's Lusk Center for Real Estate, said families that have owned homes in California for generations have an advantage.
Others may need to leave the state if they want to purchase a house.
"It's almost like we're feudal now," Green said. "You inherit the manor from your family if you happen to be a landowner. If you're not a landowner, it's really hard to get in."
For Some, Family Money Can Be A Leg Up
However, money from relatives isn't just benefiting families that have always been homeowners.
Jackie Dillon, a social worker at a Los Angeles hospital, was raised by a single mom who immigrated to the United States from Mexico.
Dillon's family has always rented. Which is why getting an FHA loan to buy a house in South Los Angeles earlier this year was such a big deal.
"We had balloons in here," Dillon said. "We never see my mom cry. But she actually shed a tear that day. She was just so happy. I think she felt proud of me."
Dillon shares the house with her mother. She now feels more financially secure.
"I did not want to be renting my entire life and not establishing any wealth," she said. "For me, it means that we're out of poverty and actually building a future."
Dillon's savings covered roughly half of the down payment and closing costs on the $450,000 house. But she had another source of help — money passed down to her after her grandmother's death.
"My grandma was the matriarch of our family," Dillon said. "Our family has always had very intelligent, strong and compassionate women. So that, to me, was just her helping us yet again."
Dillon said if she kept saving, in a few years she might have been able to afford the down payment on her own. But then again, in a few years, who knows what a house like this will cost.
'I Would Love To Stay In California'
For those who don't have relatives in a position to help, owning a house in California can feel unachievable.
Stephanie Pavón has been renting in Northeast Los Angeles with her husband Fernando for about six years. The couple has a 15-month-old son. They've considered buying a house. But Pavón said even with their decent incomes, they can't save up enough for a down payment.
"A big factor in our staying where we are is that we don't have assistance from other family," said Pavón.
They've watched prices in their neighborhood skyrocket. A three bedroom house on their street recently sold for $1 million. Another house in the area — barely bigger than their apartment at 789 square feet — is on the market for $499,000.
"There are so many people like myself who can't afford to live in a house like this. And I do wonder who can," she said.
Pavón said her family could continue to rent in Los Angeles, or they could join her sister-in-law in Texas.
"I would love to stay in Los Angeles," she said. "I would love to stay in California."
Note about data: The California Dream collaborative analyzed 89 months of FHA loan data for California, from January 2011 - May 2018. That data, which represents over 600,000 mortgages, is available here. Lenders submit the information about down payment support to HUD, and family support does not necessarily mean that relatives provided 100 percent of the down payment. On the map, we chose to show the data broken down by ZIP code, the most specific geography available. The shapes on the map are ZIP Code Tabulation Areas, which are approximations of ZIP codes, created by the U.S. Census. All ZIP codes shown on the map had at least 50 loans during this time period. Some ZIP codes are missing because they didn't have enough loans.
