• A 2016 study by Apartment List surveyed 30,000 renters and found that for 77 percent of millennials, affordability is the largest obstacle standing in the way of homeownership, particularly for those on the West Coast.
  • Millennial renters seem to have unrealistic expectations about the hefty down payments required to purchase property in expensive U.S. metros.
  • If and when millennials realize they can't afford to buy in their city of choice, the question becomes whether they will relocate or continue renting.

As millennials flock to major metros for professional and recreational opportunities, their chances of being able to buy a home appear to be more limited than they realize.

A 2016 study by Apartment List surveyed 30,000 renters and found that for 77 percent of millennials, affordability is the largest obstacle standing in the way of homeownership, compared to less than half who feel it’s mainly because they’re not ready for marriage or settling down.

[Tweet “80 percent of millennials on the West Coast say they can’t afford to buy.”]

This problem is particularly acute for those starting their career on the West Coast, in cities such as San Francisco, San Diego, Seattle, Los Angeles and Portland, Oregon, where more than 80 percent of millennials say they can’t afford to buy.

 

Source: Apartment List

Source: Apartment List

Lowballing down payments

In addition, those living in most expensive cities are prone to severely miscalculating the amount of money required for their area’s typical down payment — oftentimes by 50 percent or more.

“Using data on starter home prices and millennials’ average savings rates currently, we estimate that many renters will need a decade or more before they can afford a 20 percent down payment on a home,” the report noted.

[Tweet “The most expensive metros require hefty downpayments, which millennials underestimate.”]

For example, millennials in San Francisco reported that they’d probably need around $70,000 for their first down payment, when they’ll actually be expected to shell out more like $143,000. Seattle, Portland and Denver, which aren’t as notorious for being outrageously expensive, are still more out of reach than renters think, as shown by the data below.

Source: Apartment List

Source: Apartment List

 

Perhaps even more startling is that more than 40 percent of millennials say they’re not saving anything for a down payment.

“Even among older millennials, the picture is not much better: more than 70 percent are saving less than $200 each month, even in expensive cities like Boston or Los Angeles,” the report said. “Interestingly, 74 percent of millennials do not expect to receive any help for their down payment; only 6 percent expect to receive $10,000 or more in financial support.”

Screen Shot 2016-04-19 at 6.17.50 PM

The grand scheme of things

In the second quarter of 2015, U.S. homeownership rate reached its lowest level in 50 years — 63.4 percent, with the rate among millennials continuing to decline each quarter, Apartment List noted. Still, 79 percent of millennials “plan on eventually purchasing a house or apartment.”

[Tweet “40 percent of millennials say they’re not saving anything for a downpayment.”]

Considering the abundance of research and conjecture on this generation that aims to understand how their mindset, goals and priorities will impact the future, in essence, the implications here boil down to what will happen if and when millennials realize they can’t afford to buy a home where they currently reside.

Apartment List posits two likelihoods: millennials will relocate to more affordable cities like Atlanta, Detroit and Charlotte or continue to delay homeownership along with marriage and having children.

Email Caroline Feeney.

Like me on Facebook! | Follow me on Twitter!

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×