For millennials and Generation Z, the American Dream step of buying a home can seem hopelessly out of reach as mortgage rates hover around 8% and real estate prices continue to rise.
As a result, one in five engaged couples are rejecting linens and dishes from traditional wedding registries and instead asking friends and family for a cash deposit, according to an October report from Zillow and The Knota wedding planning site.
With an average of $70,000 needed for a 20% down payment on a first home, it’s understandable that couples are looking for creative ways to raise money.
“I think we can be optimistic that instead of throwing in the towel, young couples are willing to forgo tangible gifts or even honeymoon funds in order to get closer to realizing the dream American Homeownership,” Amanda Pendleton, personal finance expert at Zillow Real estate loans, tells Fortune. “They see the value in saving for an appreciating asset, as opposed to the immediate gratification of new bedding or silverware.”
But there’s a slight problem: It appears wedding guests are turned off by this request, as data shows friends and family are less enthusiastic about the new generation of honeymoon registries.
The typical couple receives 32 percent more for a honeymoon fund, with an average of $767, compared to an average new home fund of $556, says Esther Lee, deputy managing editor of The Knot. Fortune.
With mortgage rates hitting a 23-year high this fall and home prices on the rise, why would wedding guests be more willing to give for a honeymoon than something more practical as a fund for a first home? It’s time for a little lesson in what experts call behavioral economics.
The power of choice
Morgan Districtfront row marketing professor Emory University Goizueta School of Business says this could be because people like to give more “hedonic” products as gifts – or things the recipient wouldn’t otherwise buy for themselves. Ward received his Ph.D. in marketing since University of Texas at Austin’s McCombs School of Business and its main research focus is consumer behavior. A gift giver knows that whether or not they donate to a first home fund, the recipient will buy it themselves, she says.
“A honeymoon fund is likely something that is perceived by donors as optional – and certainly hedonic – and so by offering a higher gift, the donor may be offering something that the recipient would not otherwise have access to,” she explains. Fortune. “On the other hand, I suspect that gift givers view a new house as more utilitarian and therefore less fun to give and probably as something that recipients will purchase themselves, whether or not they receive money as a gift .”
Ward also conducted research in 2016 that shows how wedding gifts differ from other types of gifts. On one hand, she found that when gift givers were faced with purchasing from a gift registry rather than making their own gift choices, they often rejected the gift registry.
“It turns out that givers say their top priority is to please the recipient, but they often use gift-giving opportunities to express their feelings or the meaning of the relationship,” adds Ward.
Guests can also be more generous with a honeymoon fund because they can donate to specific experiences, whether it’s sunset cocktails, a tasting menu at dinner, a kayak at glass bottom, snorkeling or a ski lift pass in the Alps, says Lee. to donate to a giant fund where they may not understand the impact of their donation.
“This allows couples to spread their honeymoon funds even further, helping guests participate in each chosen experience,” says Lee. “The overall house fund is apparently a larger amount which can initially seem intimidating to clients. But with each contribution, a new real estate fund can become more accessible, and more guests potentially feel more willing to contribute.
Soaring property prices fuel the trend
While the trend of adding first-time home funds to wedding registries isn’t completely new, “they’ve really picked up steam” in recent years, said Cathryn Haight, senior gift and wedding editor. stationery at The Knot. Fortune. Since 2018, the share of couples including “household funds” in their wedding registry has increased by 55%, according to Zillow and The Knot.
While any money helps when it comes to buying a home, hundreds of dollars might actually be just a drop in the ocean for newlywed couples.
The value of a typical home in the United States right now is about $350,000, Pendleton says, meaning a couple would need to come up with $70,000 if they plan to put down 20 percent on buying a house. For comparison, the average cost of a wedding in the United States is $30,000, including the ceremony and reception, according to Real Knot Marriages Study 2022.
“That’s a lot of money and can be very intimidating for young couples looking to buy their first home,” says Pendleton. “Often, a down payment of less than 20% is very feasible, and your loan officer can explain your options. Keep in mind, however, that the less money you put down, the higher your monthly mortgage payment will be.
Fortune was early to report on this trend earlier this summer, sharing the love story of Oliver and Cassie Nilsson who first met in 2012 at an Outback Steakhouse. When it came time for them to get married and buy a house, they didn’t realize exactly how bad the market had become and how much money they would need.
“We expected that as soon as I graduated from college, we would buy a house,” Oliver said. Fortune. “We wanted to buy a townhouse because we wanted a small garden for the dogs. But we quickly realized that this was not an option for us, especially with interest rates so high.”
The couple ended up living with Oliver’s parents for eight months in order to save enough money to be able to buy a condo. To help them pay the down payment on their home, the couple added a “first home fund» – their one and only request on their wedding registry.
“Honestly, that was it (the first house fund) and her parents let us stay there,” Cassie said. Fortune. “We could never have (purchased). We would have rented all our lives.