Apartment List recently conducted a survey of more than 30,000 renters across the United States, asking questions about their plans for homeownership, affordability, and savings for a down payment.
Our research indicates that the vast majority of millennial renters (79 percent) want to purchase a home, but that affordability is the biggest obstacle that they face. You can see our national report (with data for 93 metros and 130 U.S. cities) at this link.
Today, we dive into the results for the Chicago metro specifically.
Are millennials planning to buy a home soon?
In the Chicago metro, 79 percent of our survey respondents do desire to purchase a home. Of these, the majority (34 percent) say that they plan to buy within the next 3-5 years.
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The next largest group (22 percent) plan to buy 5 or more years from now. This means that, just as on the national level, the millennial homeownership rate for Chicago will stay down for a while longer.
This compares to other metros like Boston and New York, where 34 percent of Boston renters and 35 percent of New York renters also plan to buy within the next 3 to 5 years.
Affordability poses the biggest obstacle to homeownership
The biggest obstacle to homeownership for millennials in the Chicago metro is affordability. 75 percent of those who are putting off buying a home say it is because they cannot afford to buy right now. In contrast, only 35 percent said that they were not ready to settle down, and 39 percent were waiting to be married.
Besides affordability issues, those who expect to always rent in Chicago seem to highly prioritize flexibility and claim it as the no. 1 reason why they would do so.
Millennials in Chicago overestimate the cost of a down payment
To compare millennial expectations for the cost of a down payment with reality, we asked them how much they expected to need for their own down payment. The median price of a 20 percent down payment for a starter home in the Chicago metro is $19,750, and the average millennial expectation of how much a down payment will cost is $22,640 – a difference of 13 percent.
This is relatively unique in that millennials in many other cities tend to underestimate how much they would need in order to put a downpayment on a starter home in their area.
The fact that Chicago millennials are estimating a higher down payment amount than is required for a basic starter home may have implications for the type of home they expect to buy at the outset.
How long does it take to save for a down payment?
In order to determine how long millennial renters will need to save for a down payment, we also asked them the following questions:
- How much have you saved for a down payment so far?
- How much help (e.g., from family) will you be receiving for a down payment?
- How much of your monthly income do you put towards saving for a down payment?
This allowed us to estimate how many years it will take them to save enough for a 20 percent down payment on a home. At the current savings rate in the Chicago metro, it will take millennial homebuyers about 5.4 years to save up enough for a down payment.
This is nearly half the amount of time it will take for millennials in Boston and New York to save, at an estimated 10.1 and 10.4 years, respectively.
Compared to other large metros closer to the east coast, Chicago is doing relatively well. In our national study we found that cities on the coasts tended not to be doing as well in terms of homeownership as cities further inland, and the Chicago metro proves this point well.
Although most millennial renters in the Chicago metro cite affordability as the primary reason why they cannot buy right now, it is heartening to know that most are overestimating the amount necessary for them to make a down payment on their first home. Until then, it seems that many appreciate the flexibility that renting provides.
Yuki Graviet Knapp is a Content Marketing Associate with the Growth Team at Apartment List and is a resident of the Bay Area.