Home ownership is one of the most important hallmarks of the “American dream”. In the classic book “A Tree Grows in Brooklyn”, a commentary on the American Dream at the turn of the century, the main character’s immigrant grandmother talks about the importance of “owning land”. Yet a long time has passed since then, and home ownership remains in people’s minds. Yet data indicates that it’s becoming rarer and rarer among millennials, but that’s not for lack of wanting. According to data from Apartment List, although 80 percent of millennials want to buy real estate, 68% of millennials have saved less than $1,000 for a down payment, so a pretty small number of them are actually in a position to buy.
Many of them want to buy, but don’t seem to be realistic about what they’ll actually be able to buy. For example, many of them say that buying real estate is in their five-year plan. But given their current savings rates, millennials are on average at least 10 years away from home ownership. Many of them live in urban areas where real estate is extremely expensive, where the time frame is even longer. In Denver, for example, their current savings rates will allow them to afford a home after 16 years, while in San Jose that number goes up to 24. Many millennials don’t fully understand how expensive real estate has become, especially in the cities where many of them live, or how high down payments actually are.
According to Apartment List, for example, the median price for a condo is $420,400, meaning that a 20 percent down payment costs around $84,080. Millennials reviewed in that region estimated that they will need $36,340, which is less than half of the actual amount. And considering the statistic mentioned above, that more than two thirds of millennials have more than $1,000 saved for such a payment, the idea that they could purchase a home within a five-year period is almost laughable.
For millennials to take their five-year pipe dream and turn it into a reality, they’re going to have to start saving more, and fast. Research has indicated that millennials are actually pretty good savers, even though their priorities are a lot different from previous generations. For example, they typically eye short-term goals instead of long-term ones. Yet if owning property is important to them, then millennials could make their dream a reality.