Intergenerational Transfers, Borrowing Constraints, and Saving Behavior: Evidence from the Housing Market

We examine the effects of intergenerational transfers on saving behavior by analyzing transfers targeted to first-time home purchases. Transfer recipients have a shorter time to save for a down payment of 9-20%. For each dollar of transfer received, total savings falls by 29-40 cents and the down payment rises by 61-71 cents. Transfer recipients increase the value of the home purchased, but by an amount that is much lower than possible if the transfer were fully leveraged. In addition, transfers appear to help households achieve certain down payment thresholds that give favorable mortgage terms.