Millennials aren't buying homes in the same numbers as previous and older generations, but it's not because they don't want to. The vast majority of millennials do indeed aim to buy someday, or would even like to now if they could. Unfortunately, the numbers don't look good.
New data from Apartment List shows that, although 80 percent of millennials would like to purchase real estate, very few are in a good position to buy, largely because they have nothing saved. According to the report, "68 percent of millennials said they have saved less than $1,000 for a down payment. Almost half, or 44 percent, of millennials said they have not saved anything for a down payment."
Depending on where they are looking to buy, given their current savings rate, millennials are 10 years or more away from home ownership. Young residents of pricey San Jose, Calif., will have to be exceptionally patient: Odds are they won't be in a good position to buy an apartment there for "almost 24 years," or "until the year 2041."
Apartment List reports that "millennials in San Francisco, San Diego, Los Angeles, Austin" and other major metro areas "each face a wait of at least 19 years."
As the report puts it, "millennials face a severe shortage of affordable entry-level homes in many parts of the country."
It's not clear to what degree most millennials realize the magnitude of the problem. They acknowledge that buying is a long-term goal, and over 70 percent cite "affordability" as the main problem, but they also seem unduly optimistic about when they think they'll be able to buy. For example, a majority of those surveyed said that buying real estate is in their five-year plan.
In actuality, it will probably take them at least twice that long to save up enough for a down payment.
The discrepancy might come, in part, from the fact that millennials don't fully understand how expensive real estate has become, especially in desirable cities, or how high down payments are. Apartment List reports:
Millennials seem to have an expectation that they need a lot less for a down payment than they actually do. For example, in Los Angeles, the market with the widest gap in expectation and reality, the actual median price of a condo is $420,400, meaning that a 20 percent down payment comes out to $84,080. Respondents in that region estimated that they will need $36,340, which is less than half of the actual amount.
In order to make buying a realistic part of a five-year plan, most millennials will have to start saving more. Luckily, research has shown that millennials are actually good savers, though their priorities are different and distinct from those of other generations: They're generally eyeing short-term goals rather than long-term ones. But, if becoming property owners matters enough to them, they may well be able to make their home-buying dreams come true.