Down Payment Main Obstacle For Millennials

When it comes to making the move and actually buying a home, many of today’s young adults are still a long way off. A recent survey indicates that, of potential homebuyers, 68 percent of Millennials have less than $1,000 saved toward a down payment, with 44 percent saying that they haven’t saved at all.

Real estate website Apartment List conducted a nationwide survey of about 24,000 renters and focused on the responses of Millennials, 80 percent of whom said that they want to purchase a house or condo. Millennials are defined as people born between 1982 and 2004.

In the same vein as savings, 53 percent of Millennial respondents to the survey said that the down payment is an obstacle for affording a home, while 36 percent cited monthly payments and 29 percent said that a low credit score are hurdles. 

But down-payment difficulties may be even greater than Millennials anticipate. According to the survey, Millennial respondents underestimate how much a 20 percent down payment would cost to buy a median-price condo in all but one of 31 major markets. For example, the median condo in Los Angeles costs $420,400, meaning a 20 percent down payment would be $84,080. Respondents expected a $36,340 down payment, which is only 43 percent of the actual down-payment cost. In comparing expected down payments and actual down-payment costs, respondents’ estimations were two-thirds or less in 22 markets. Only in Las Vegas did respondents overestimate the price ($26,790 expected to $23,300 actual).

Young adults who want to buy a home in some of the nation’s most expensive markets will need to be patient. Based on wage increases and current and future down-payment savings, it will take Millennials more than 20 years to save for a 20 percent down payment in San Jose, Calif., Austin, Texas, and Los Angeles. It will take more than a decade to save for a down payment in 13 additional cities, including Chicago, Denver, Houston, and Nashville, Tenn. Kansas City, Kan., is the easiest place to save, where it will take just 5.5 years.

Even with these potential roadblocks, Millennials still feel strongly about homeownership. The share of respondents who said they plan to eventually buy a home increased from 74 percent to 80 percent from 2014 to 2016. But more people are delaying their dreams, as 36 percent of respondents said they plan to buy a home five or more years from now, up from 23 percent in 2014.

When asked what’s preventing them from buying, 72 percent of Millennial respondents said that they can’t afford it, and 45 percent said that they want to settle down before making such an important life choice. A little more than one-third said they were waiting for marriage.