Photo: Alfonso Andrada/Flickr
In some parts of the US, it could take a Millennial renter 20 years — or even longer — to save up enough money for a downpayment for a home, says a newly released report by the listing site ApartmentList.
The finding comes by way of ApartmentList’s recent nationwide survey of Millennial renters in the US that showed more than half simply can’t afford to buy a home even though an overwhelming majority of respondents want to.
The survey was conducted between October 2016 and April 2017, and asked around 24,000 Millennial renters about their saving habits and homebuying plans. ApartmentList also used home-pricing data provided by the National Association of Realtors (NAR).
Nearly 80 percent of respondents expressed a desire to buy a home, but 72 percent currently could not afford to do so.
Millennials are putting their homebuying plans off longer as well. Some 67 percent of respondents said they planned to wait three years or more before buying a home, up from about 53 percent in 2014, says ApartmentList.
And at their current rate of savings, Millennials would need on average at least 10 years to save enough money to buy a home in the country’s largest metro areas.
In more than half of the metro areas studied, it would take nearly a decade to save enough for a downpayment.
That number skyrockets for California homebuying hopefuls. On average it would take a Millennial 24 years to purchase a home in San Jose — the longest of all the metros studied — and 19 years in Los Angeles, San Francisco, and San Diego.
In the New York City metro area, Millennial renters would need just under a decade to save for a downpayment based on their current rate of savings, according to ApartmentList’s analysis.
Nearly 50 percent of respondents said they had not started saving for a downpayment yet, and 40 percent said they weren’t saving on a monthly basis.
Meantime, Millennials were grossly underestimating how much money they actually need to save in order to buy a home.
In San Jose, for example, Millennials estimated their downpayment would be $64,610, but the actual average downpayment is $145,750 — or 44 percent higher than Millennials estimated. This was based on the median condo price of $728,800 from data provided by the NAR, and assuming 20 percent down.
Given some of the survey’s findings, it seems Millennials may be out of the homebuying market for the foreseeable future.
Even with a reduced downpayment of 10 percent, currently only 15 percent of Millennial renters will have enough saved to buy a home within a year, and only 36 percent will have enough saved to buy within 5 years.
Also, the nationwide inventory shortage is likely to keep Millennial homebuyers sidelined. Affordable entry-level or “starter homes” are increasingly more difficult to find in many of the country’s hot housing markets.
Part of the problem is that Millennials just aren’t saving.
“We did find the millennials with high incomes save lower portions of their income, which indicates some millennials could be saving more for a down payment,” Andrew Woo, ApartmentList’s director of data science and growth tells BuzzBuzzNews.
There is still hope things could turn around for Millennial renters, according to Woo.
“Additionally, programs to help millennials purchase homes with lower down payments, for example a 10% down payment, would help increase millennial homeownership rates,” Woo says.
There’s also the possibility of wage growth in the coming years, which Woo says might accelerate Millennial savings.
Or, they could just move to move affordable metros.
“But based on their current financial statuses, it seems unlikely that Millennials will begin purchasing homes en masse in the near-term future,” Woo adds.
Of course, Millennials could just lay off the avocados and $4 cups of artisanal coffee to save up for property, one Aussie real estate tycoon recently suggested.
But a Millennial mortgage calculator raises some questions about effectiveness of that approach.
And it doesn’t even take into account the latest threat to Millennial homeownership: lattes served in avocados.