Though millennials express desire for homeownership, they aren’t saving anywhere near what they need for a down payment. About 80 percent of millennials recently surveyed by rental website Apartment List say they hope to one day buy a home, but 36 percent say they’ll likely need to wait more than five years before they can. Only 16 percent believe they’ll be able to buy within two years, according to the survey of 24,000 millennial renters born between 1982 and 2004.
More than two-thirds of survey respondents say they don’t even have $1,000 in down-payment savings, but one in three believe they could come up with a 10 percent down payment in five years or less. “Millennials’ plans to purchase a home are being pushed further and further into the future,” says Chris Salviati, a data analyst with Apartment List. “That could have serious impacts on their long-term financial stability.”
For millennials who plan to save up 20 percent for a down payment, they may have a particularly long wait until they attain homeownership. For example, buyers in San Jose, Calif., may need to save for at least 24 years before having enough money to cover a 20 percent down payment for a condo there. In metros such as Austin, Texas, and Los Angeles, millennials will need 21 years to save. (The calculations entail home price, income, and savings growth projections.)
“A lot of college-educated millennials are still carrying a lot of student debt,” Salviati says. “To move to some of the best-paying jobs, millennials have to live in some of the most expensive cities. And throughout the country, increases in home prices are outpacing wage growth.”
Still, in reality, most first-time buyers put down a lot less than 20 percent or 10 percent on a home, so millennials may need less money than they think. The Federal Housing Administration insures loans that require only a 3.5 percent down payment. Other loan options with smaller down-payment requirements are available, too.