With tight housing inventories pushing prices higher and squeezing out would-be homebuyers, millennials hoping to buy a place of their own may need to save up for more than two decades before they can afford to make a down payment – and that’s just to afford a condo.
A new annual study published Friday by housing hub Apartment List found that 80 percent of apartment-dwelling millennials born between 1982 and 2004 would, in a perfect world, want to purchase a house or condo of their own rather than fork over monthly rent payments.
Whether they can afford to do that, though, is another question entirely. Researchers surveyed 24,000 renters across the country and found that nearly 70 percent of millennials have less than $1,000 set aside for a down payment. Only 15 percent had stashed away at least $5,000, and only 29 percent are consistently saving at least $200 each month to eventually go toward a down payment.
So at their current rate of saving, millennials looking to put 20 percent up front for just a median condo down payment would need to save for at least 19 years in pricey real estate locals like San Fra “A millennial in San Jose, the metro with the longest wait time of almost 24 years, wouldn’t be able to afford a 20 percent down payment on a condo until the year 2041. Millennials in Kansas City need the least time to save for a down payment: five and a half years,” the report said. “Even if we assume a smaller down payment of 10 percent, just over one in three millennials will be able to save the required amount in five years or less.”ncisco, San Diego, Los Angeles, Austin and San Jose.
Housing prices in the U.S. have come a long way in recent years since bottoming out after the real estate bubble burst and the country was thrown into the Great Recession. The rebound has been so significant, in fact, that certain parts of the country are now wrestling with affordability concerns, particularly for lower-earning millennials and first-time homebuyers.
The S&P CoreLogic Case-Shiller National Home Price Index in February climbed to an all-time high for a fourth consecutive month. David Blitzer, the chairman of the index committee at S&P Dow Jones Indices, chalked up the recent gains in part to a constrained supply of options and “relatively few existing homes listed for sale.”
“Housing affordability has declined since 2012 as the pressure of higher prices has been a larger factor than stable to lower mortgage rates,” he said in a statement accompanying the report.
Robust demand for housing and a lack of few reasonable entry-level options have pushed prices through the roof in certain parts of the country. And with rent prices rising in tandem, those currently stuck in apartments often have less to stash away each month than has historically been the case.
According to the Census Bureau, the homeownership rate for those under the age of 35 most recently sat at 34.3 percent. That’s down significantly from its pre-recessionary 43 percent level.
Factor in the considerable student loan debt held by many millennials and career stagnation after beginning their professional careers during or in the immediate aftermath of the Great Recession, and Friday’s Apartment List study paints a pretty bleak picture for millennial homeownership viability.
“Homeownership has traditionally been a key component of the American Dream, and the primary driver of wealth creation for many families. However, in the aftermath of the housing market collapse in 2008, the U.S. homeownership rate has fallen to historic lows and, despite recent leveling off, has not shown signs of recovering to its pre-recession peak,” the report said.
Millennials’ expectations for homeownership, at the very least, appear to have moderated slightly in recent years. The percentage of millennial renters who said they expect to make their next home purchase within the next three years has fallen every year since 2014, when only 23 percent of respondents said they planned to wait five or more years to buy a home or condo.
In the latest report, 36 percent said they expect they’ll need to wait at least five years. Affordability concerns were cited by 72 percent of respondents when asked why they weren’t currently looking to buy a home.
But even though millennials’ timelines appear to have become more realistic, researchers found they’re still underestimating how much it will actually cost to make a 20 percent down payment.
“For example, in Los Angeles, the market with the widest gap in expectation and reality, the actual median price of a condo is $420,400, meaning that a 20 percent down payment comes out to $84,080. Respondents in that region estimated that they will need $36,340, which is less than half of the actual amount,” the report said. “Even in more affordable metros like Detroit, where the median price of a condo is $163,300, a 20 percent down payment would be $32,660, but millennials in that region said they expect to have to pay just $16,340.”
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