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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