Maybe what makes millennials reluctant homebuyers is simple finance: they can’t afford a down-payment.
It isn’t the intent to buy that is lacking or the hope of having a home that is missing, it’s the savings that is keeping the vast majority of young people from swapping their rentals for homes, according to a recent survey by Apartment List.
For years, experts have debated the relative lack of first-time buyers: Was it a matter of economics or was this a cultural shift?
Those who thought the former, figured that it would work itself out over a few years. But if the latter, it would radically change the landscape of the market for decades.
The latest snapshot sides with the work-itself-out crowd. But with a twist.
Roughly 85 percent of Atlanta millennials in Atlanta said that they plan to buy a home or condo, according to the Apartment List survey. And of those people, 70 percent say they are waiting because they simply cannot afford to buy.
Now, the twist: it’s not a matter of months we’re talking about.
Based on their savings rates, millennials in Atlanta will need an average of 8.7 years to save enough for a 20 percent downpayment.
The millennials “significantly underestimate the amount they will need for a downpayment,” said Andrew Woo, a data scientist at Apartment List.
In Atlanta, that downpayment on the median price of a condo is $34,620, he said, “but millennials estimate that they will need only 50 percent of that amount.”
First-time buyers are crucial a healthy housing market. They’re like the playground kids crawling into a tunnel that keep the kids already in there moving along.
And so the relative lack of first-time buyers was blamed for the lackluster demand in the lower tiers of the market as housing came out of the recession. What made things worse was a scarcity of homes for sale, so the demand that did exist just pushed prices up – and that will make homes harder for first-timers to afford.
“Our analysis shows that a lack of savings, combined with the shortage of affordable starter homes, will leave a large share of millennials renting for years,” Woo said.
But now, there’s a double twist.
From anecdotal evidence, it looks like a lot of first-time buyers in Atlanta are getting mortgages on homes – sometimes pretty hefty mortgages at that – with downpayments of 10 percent or even 5 percent of the price.
If that is the case, it may not take quite as long as the Apartment List study concludes.
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AJC Business reporter Michael E. Kanell keeps you updated on the latest news about jobs, housing and consumer issues in metro Atlanta and beyond. You'll find more on myAJC.com, including these stories:
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