Most Millennials Are Not Saving Enough For Their Mortgage Down-Payments
According to a survey done by Apartment List, 79% of millennials who currently rent would like to purchase a home, but can’t save up enough money to do so.
This is partly because millennials underestimate the cost of a down payment for a house, sometimes by over 50%.
This is especially true of millennials in metropolitan areas, where actual prices are often double what they expect.
Here are some of the down payment expectations vs reality:
Millennial renters in metropolitan California seem to underestimate prices the most—of course it doesn’t help that their prices are also some of the highest in the country.
Expectations aside, millennials aren’t well-prepared financially.
Even though millennials do actually save more than other generations, as a proportion of their income, most millennials are not saving for a down payment on a house. Instead, they tend to save for lifestyle items such a gym memberships and traveling.
The same survey showed that over 37% of millennial renters have not saved anything for a down payment on a house, and over 41% are not saving every month.
When looking at how long it would take to save for a 20% down payment, the survey showed it would take most millennials more than a decade—in Los Angeles, Sacramento and San Francisco, it would take over 20 years!
But this doesn’t mean the demand’s not there: most millennials are looking to buy a home, which makes sense given that 1 in 3 millennials still live at home with their parents.
Drew Reading, a Bloomberg Intelligence U.S. home-building analyst, predicts millennials will drive demand for new housing for decades:
As more [millennials] age, there’s huge demand behind home ownership. This large base of population growth gives you the sense that demand for entry level, either in rental or the for-sale market, will be strong in the next several years.
There’s no doubt that this will continue to inflate housing prices, which have already risen dramatically over the last few decades—homes are 73% more expensive than they were in 1973, in real terms.
House prices, along with job prospects and a sluggish economy, are the primary reasons why millennials are worse off than their parents were, economically speaking.