DENVER – A new survey of millennial-aged renters calls into question the widely-held notion that young people aren’t interested in buying homes. Most of them do want to buy; they simply can’t afford to.
The issue isn’t making a monthly mortgage payment, but rather saving up enough money for a down payment, according to online rental listing site ApartmentList. Add to that a lack of affordable housing options in cities like Denver, and most millennials view home ownership as out of reach.
The site conducted a survey of approximately 24,000 renters and found that the overwhelming majority of millennials – defined here as people born between 1982 and 2004 – said they would like to buy a home but don’t plan to do so anytime soon because of their finances.
In Denver, 81 percent of survey respondents who are putting off buying a home said they’re waiting to buy because they can’t afford to.
Millennials cited the down payment as the biggest obstacle to home ownership and 68 percent of respondents said they have less than $1,000 saved up. Forty-four percent haven’t saved anything at all.
Assuming a standard 20 percent down payment and the median condo sale price of $276,700 in Denver, it would take millennials 16 years, on average, to save up enough if they’re putting away $200 every month, according to ApartmentList. For older millennials, that means they would likely be in their 40s before they could afford to buy a home.
It could be worse: In San Jose, Austin and Los Angeles, it would take more than 20 years to save enough for a 20-percent down payment.
Is 20 percent down really necessary?
There is somewhat of a silver lining here. Though 20 percent is a standard amount for a down payment, many first-time homebuyers don’t necessarily need that much.
There are many federal, state and local programs that can help first-time homebuyers with their down payments, making it possible to get a mortgage without the full 20 percent.
If, for example, a buyer is able to get a loan with only 5 percent down through grants or other assistance, they’d need an average of just 4 years to save up instead of 16. That’s still a way down the road, but it’s much more attainable for someone who’s looking to buy before they hit middle age.
Just be aware that low-down-payment loans like FHA loans usually require mortgage insurance, which will increase the amount you pay each month.