The dreaded down payment has really become a thorn in the side of most Millennials who are looking to purchase a home. Since most Americans under the age of 35 lack the savings for down payments, many will likely be forced to delay purchasing a home until later in life and take on larger debt loads when they do eventually buy, writes Josh Boak for the Associated Press.
The problem isn’t getting any better, either, as home prices continue to outpace pay increases, and increases in rent are all but eliminating the possibility to even start saving. According to a survey of 30,000 renters that was released by Apartment List, 37 percent of Millennial renters have not saved a single penny for a down payment. Conversely, 79 percent of Millennial renters have aspirations of owning a home in the future. This gap between the realities of what has been saved and the expectations for the future is a bit worrisome.
For renters in larger metros who have been saving as best they can, on average, they have still only saved $5,830. This is less than a fifth of the savings needed for a typical 20 percent down payment on a $175,000 home. If Millennials need to put off buying a home longer in order to come up with the necessary funds, it would follow that many would also delay things such as marriage and having children.
And it gets worse, as not only have home prices increased while wages have remained largely stagnant, but Millennials are burdened with more student debt than ever before, too. The average Millennial has a student debt approaching $30,000. Over half of homebuyers under the age of 35 said student debt delayed their ability to purchase a home.
In some cities, such as San Francisco or Denver, it would take Millennials 11.4 years and 8.2 years respectively to achieve a 20 percent down payment based on current home prices. In areas like Philadelphia and St, Louis, however, it would take less than two years.