Though many millennials are determined to become homeowners, the amount they’re saving may condemn them to perpetually renting.
A recent survey by Apartment List has shown that though 80 percent of millennial renters, ages 18 to 35, want to purchase a house or condo, 72 percent of them know that they can’t afford it.
How much do millennials need to save?
Assuming that buyers will need to afford a 20 percent down payment, Apartment List calculated how long it will take for millennials to save for homes in metro areas across the country.
The results of the survey weren’t very reassuring.
According to the study, millennials in Kansas City need the least time to save for a down payment on a condo, but they still need to save for five-and-a-half years. This saving period is contrasted with San Jose, the metro area that requires the longest saving period. In San Jose, a millennial will need to save for nearly 24 years to afford a 20 percent down payment on a condo.
The study pointed out that even if buyers can put down a payment of 10 percent, only about one-third of millennials will be able to save that amount in five years or less.
Part of the problem is that millennials aren’t saving nearly enough; 40 percent of young people said they haven’t been saving anything for a down payment on a monthly basis, and nearly 70 percent said they have saved less than $1,000.
At this rate of saving, millennials in more than half the cities that the survey looked at will need at least a decade to save for a down payment. In some of the costliest West Coast cities, they will need two decades or more.
But should millennials take all the blame?
The issue at hand is not just that millennials aren’t saving; entry-level homes — aka starter homes — are becoming less common and less affordable.
“Entry-level“ is a price range that is at the lowest end of the home price spectrum. Starter homes are supposed to lower the financial barrier, ideally allowing renters to enter the realm of homeownership.
The idea used to be that starter homes allowed homebuyers to save up for a few years, eventually moving on to a better house.
Though a good concept, these starter homes have fallen out of style in recent years. Construction is often focused on luxury apartment buildings, leaving fewer affordable options for first-time buyers.
As the housing market becomes increasingly posh and inaccessible, millennials are finding that they can’t save enough to become homebuyers.
Though it’s easy to blame millennials, this isn’t completely their fault; it’s hard to save enough when wages can barely keep up with the rising cost of living.
If the housing market becomes more reasonably priced, or if wages can rise to the occasion, millennials would undoubtedly start purchasing their homes. Until then, many young people will be stuck renting.
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