Here's how long it will take young people to afford to buy a home nationwide
Eighty percent of millennials report that they would like to buy a home, and a majority even say that it's part of their five-year plan. Yet 68 percent have less than $1,000 saved. Almost half, or 44 percent, have saved nothing at all, according to new data from Apartment List.
Apartment List reports that "72 percent [of millennials] said affordability is the primary obstacle" to purchasing real estate. And many of those who have been to college are hampered by the loans they had to take out to finance their educations. According to their findings, "high levels of student debt and stagnant career opportunities have long kept millennials sidelined from the real estate market." It defines millennials as those born between 1982 and 2004.
When the cost of college started rising sharply in the 1990s, the universities jacking up the prices probably didn't consider the effect their actions would have on the real estate market of today. Now, student loans are a primary reason given why millennials would like to buy homes but cannot afford to.
All of this means that, if you do want to buy, it's going to take you a lot longer than you might expect, based on where you live.
Even though the labor market has shown some signs of improvement, the financial situation for millennials remains pretty grim. Americans owed $1.3 trillion in student loans by the end of 2016, and millennials alone give over roughly a fifth of their salaries to loan payments, according to Citizens Bank. That's thousands of dollars each year that cannot go toward a down payment on a home.
Given current rates of saving, stagnant wages and the alarming lack of affordable homes nationwide, how long will it actually take millennials to buy a home? Depending on where you are, it could be over a decade, says Apartment List. In the Bay Area, young people are more like 20 years away.
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."
Although young people in Miami are only about six years away from potential home ownership, the outlook in many metro areas around the country is less sunny. Apartment List reports that "millennials in San Francisco, San Diego, Los Angeles, Austin" and other cities "each face a wait of at least 19 years."
It doesn't help that millennials also chronically underestimate the cost of a down payment, now that home prices are rising twice as fast as wages: "Millennials seem to have an expectation that they need a lot less for a down payment than they actually do." Young residents of Los Angeles, for example, "estimated that they will need $36,340, which is less than half of the actual amount."
Little wonder that some millennials are giving up and focusing on more attainable goals, like getting a dog. The trouble is, animal companionship won't be able to help materially in the long run. Bestselling author David Bach warns, "If millennials don't buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter."
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