As millennials are about to surpass the Baby Boomers as America’s largest generation, their impact on the American housing market is becoming more significant. To find out exactly how they are changing the market, researchers at Apartment List asked 6,400 millennials about their plans for homeownership and major hurdles preventing them from realizing the American Dream. The results presented in their report reveal several major issues and trends.
The American Dream is still a goal for the majority of millennials, but they aren’t expecting to achieve it anytime soon.
9 out of 10 surveyed millennials see homeownership as a part of their future, however, that future is very distant. Only 4.9% of responders believe that they’ll be able to purchase a house within the next year, while 34% expect to wait 5 years or more to get to that point in life.
Down payment is the major obstacle preventing millennials from becoming homeowners.
Of those surveyed, 62% pointed out that down payment is a major hurdle on their path to becoming homeowners. While millennials understand the seriousness of the situation, many of them underestimate the amount of money they need to put away for a down payment. For instance, San Francisco millennials expect the average down payment for a median condo to be $100,000. In reality, however, it’s closer to $180,000. This trend is true for all large metropolitan areas.
More than half of millennials have zero saved for the future down payment.
A whopping 48% of millennials have nothing saved for their down payment, and only 11% put away $10,000 or more. Two-thirds of millennial renters will have to wait two decades to be able to accumulate enough money for a 20% down payment for a median-priced condo in their market.
Student debt, lagging and increasing housing prices are to blame, not avocado toasts.
Contrary to popular belief, millennials are not culpable of their situation. They happened to be born at the time when college tuition started growing at a very fast pace. Since 1980 the average cost of undergraduate tuition has grown by 160%, while the real median family income has increased by 25%. The median home price has jumped by 60%. 23% of graduates without college debt are able to save for a down payment within the next 5 years, while only 12% with college debt can do the same.
Down payment assistance from family mostly helps high earners.
Millennials earning over $100,000 per year expect to receive $51,172 on average for housing from family members. The ones making less than $25,000 will have likely received around $4,358 in assistance. This 10-fold difference showcases a perpetual circle of poverty.
Down payment assistance might be the key to achieving the American Dream for millennials.
High college tuitions are likely to remain constant, at least for the next few years. Therefore, figuring out a way to secure a lower initial down payment might be a viable solution to this major generational issue. Divvy, for example, requires only 2% down payment, putting homeownership within reach for a large share of millennial renters.
This post was published in partnership with Apartment List and was written by Sania Tran. To view the full article, please click here.