Young renters aren’t saving enough for homebuying

Millennials want to own homes, but the ability to afford a property is deterring them.

While 80 percent of millennial renters want to purchase a home, 67 percent reported they are waiting at least 3 years to do so, according to a recent survey from Apartment List, that included 24,000 millennial renters. However, 16 percent plan to purchase in the next two years. Based on their current rate of savings, millennials will need anywhere from 5.5 to 24 years to put down a 20 percent down payment. Even with a 10 percent down payment, only about one-third could afford after saving for 5 years.

Currently, homeownership for millennials is at 34.3 percent, still below the pre-recession level average of 43 percent.

Affordability is a prime concern. Seventy-two percent of potential homebuyers said it is the top reason they haven’t purchased a home or are delaying purchasing a home. However, this is down 5 percent from last year’s survey. Both college graduates and non-college graduates cited affordability as the top obstacle.

While most cite the down payment as the hardest factor, more than one-third said the monthly payments are an obstacle, and 29 percent said their low credit score is stopping them. Sixty-eight percent reported they have less than $1,000 saved for a down payment, while 44 percent have nothing saved. Fifteen percent have saved at least $5,000. Across ethnicities, Asians were the most likely to have more than $10,000 saved for a down payment, and the most likely to be saving at least $600 each month for a down payment.

“It seems that, despite aspiring to purchase a home, millennials in many cities are many years away from being able to actually afford to do so. It’s possible that increased wage growth will allow millennials to accelerate their savings in the coming years or that millennials in the most expensive markets will migrate to more affordable areas as they prepare to settle down, but based on their current financial statuses, it seems unlikely that millennials will begin purchasing homes en masse in the near-term future,” said Andrew Woo and Chris Salviati of Apartment List.