Half Of Millennials Have No Money Saved For A Down Payment
It’s no wonder so many millennials are still living at home with their parents. Millennials face lots of obstacles in owning their own homes, and at current savings rates, two-thirds of them will need more than 20 years to save a 20-percent down payment in their city, according to a new study by Apartment List.
High student loan debt held by many millennials is partly to blame.
College-educated, debt-free millennials have almost three times the down payment savings as those with debt, Fox 42 KPTM reported. In five years, nearly twice as many debt-free millennials can afford a 20 percent down payment on a median-priced starter home.
Millennials have dreams of home ownership like everyone else. They want to buy and set up their own homes but many have not made financial plans to do so. Nine out of 10 millennial renters want to purchase a home, but just 4.9 percent say that they will do so within the next year, while 34 percent expect to wait five years or more, wrote Chris Salviati and Rob Warnock, the authors of the study.
Another obstacle for millennials is that homes just aren’t affordable for a majority of them. Seventy-two percent of millennial renters said cost is a major challenge:
- 72 percent of millennial renters who plan to purchase a home cite affordability as a reason that they are delaying homeownership.
- 62 percent pinpoint a lack of down payment savings specifically.
- 48 percent of millennial renters have zero down payment savings.
- 11 percent have saved $10,000 or more.
There are other reasons it has been so hard for millennials to become homeowners.
“Several long-term macroeconomic trends have made homeownership a difficult goal for millennials to attain. Much of the generation came of age during or in the aftermath of the Great Recession, resulting in limited opportunities and stagnant wage growth in the crucial early stages of millennials’ careers. Many millennials have also seen large student debt burdens eat up the portion of their paychecks that may otherwise have gone towards down payment savings. Meanwhile, construction of new single-family homes has lagged significantly in recent years, leading to a severe shortage of starter home inventory for millennials looking to buy,” the report stated.
Poor credit scores are also holding back millennials from home ownership. Some 37.7 percent of the study’s respondents were concerned about their credit scores.
“Just 15.8 percent of Asian respondents are worried about credit, compared to a staggering 58.5 percent of Black respondents. Similarly, credit poses an obstacle for 51 percent of those with less than a bachelor’s degree, but just 19.4 percent of those with a bachelor’s degree or higher,” the study found.
One reason Millennial home ownership is so low: We're not building condos anymore, a cheaper option for first-time buyers.
Condos historically made up 22% of multi-family housing developments. Now they make up 7% https://t.co/YN0Gy1ipst
— Mike Rosenberg (@ByRosenberg) February 22, 2018