Millennials Need More Than a Decade to Save for a Home Downpayment

April 20, 2016, 2:34 PM UTC
New Study Names San Francisco As Most Expensive To Buy A Home
SAN FRANCISCO, CA - FEBRUARY 18: People stop to look at San Francisco's famed Painted Ladies victorian houses on February 18, 2014 in San Francisco, California. According to a report by mortgage resource site HSH.com, an annual salary of $115,510 is needed to purchase a house in San Francisco where the median home price is $682,410. The report included 25 of the nations largest metropolitan cities with Cleveland, Ohio being the cheapest with a needed salary of $19,435 to purchase a home. (Photo by Justin Sullivan/Getty Images)
Photograp by Justin Sullivan—Getty Images

Millennials and home ownership go together like Taylor Swift and Kanye West do nowadays. But a new report shows just how hard it could be for young Americans to buy a fancy pad.

In a survey of around 30,000 renters by online rental marketplace Apartment List, around 79% of millennial renters dreamed about purchasing a home, but admitted that affordability remains a huge obstacle for them. That’s not surprising, since home ownership rates are perennially low among those under 35-years-old.

But how big of a challenge is it? Using data on starter home prices and the average saving rates for millennials currently, Apartment List found that renters in 12 major metropolitan areas would need a decade or more before they could afford even a 20% downpayment on a home.

That number is greatest in San Francisco, where homes are notoriously expensive. Most millennials would need to save for almost 28 years before they could afford a starter home’s downpayment, which could come out to around $142,800 in the Bay Area.

 

The West Coast, overall, is especially problematic for millennials, with Californian cities taking the top four worst spots to pay for a home in this survey.

The length of time needed for a home could also be a reason why younger Americans aren’t especially interested in saving for one. In Apartment List’s survey, 37% of millennial renters have not saved a single cent for a down payment, and more than 41% have not set aside a portion of their monthly income for a future home.

 

Last July, researchers at the St. Louis Federal Reserve recommended young adults postpone home ownership for years, if not decades. They asked millennials to “delay purchase of a home with its attendant debt burden until it was possible to buy a house that did not make the family’s balance sheet dangerously undiversified and highly leveraged.”