A new survey finds many renters in their 20s and 30s have essentially put homebuying on hold and are planning to be “forever renters.”
The finds that 12.3% of millennials say they plan to “always rent” — up from 10.7% just a year ago. (Compared to the national average, fewer millennials in the D.C. area said they plan to always rent — 11.7%.)
And while there are “lifestyle benefits” to renting, such as being able to live more flexibly, the biggest reason for not signing on the dotted line for a home is the lack of affordable housing. Just under 70% of millennial renters said they can’t afford to buy, according to the survey.
CBS ²ÝÝ®´«Ã½ Business Analyst Jill Schlesinger said it’s a positive sign that so many people in their 20s and 30s want to own their own homes — even if economic reality is standing in the way.
“We had heard for a while that, oh, millennials are just not into homeownership,” Schlesinger told ²ÝÝ®´«Ã½. “And yet, what we do find is they’d love to be able to buy a home, however, that they see the lack of affordability a huge problem. They just cannot afford to buy a home in many markets.”
That’s compounded by the fact that millennials are digging out of thousands of dollars of student loan debt, she said.
The survey found that about 57% of millennials have student loan debt, and they’re saving about $100 less a month than their debt-free counterparts.
Among millennials who want to own their own home someday, scraping up enough for a down payment remains “the largest expense and biggest obstacle to homeownership,” the authors of the Apartment List study said.
Still, nearly half of millennial renters — 48% — do not have a single penny saved up for a down payment, according to the survey.
MONEY ON OUR MINDS SERIES (2018)
- Part 1 — ‘Money is on our minds’: Millennials attempt to stay afloat amid student loan debt
- Part 2 — Student loan debt, wealth divide are harming millennials’ homeownership dreams
- Part 3 — ‘I don’t know if what I’m doing is right’: DC-area millennials face barriers to retirement planning
Schlesinger said there are lots of reasons why a 20% down payment is the standard.
“It protects you …. if the market does move on you. It does give you a little bit of a safe harbor. But that said, the down side is when you put less than 20% down, you usually don’t get the best rate, and you also have to pay private mortgage insurance, or PMI.”
The cost of private mortgage insurance runs anywhere from about 0.3% and 1.5% of the total loan amount, and has to be paid until you get at least 80% equity in your home, she said.
“But, I understand, certainly in a market like the D.C. general area, the suburbs around D.C., home prices are so expensive,” Schlesinger said. “It may be that you have a great job and you can afford the payments, but you don’t have the down payment itself. So, I understand why people are turning to less than 20% down.”
The Apartment List survey found just 13% of millennials across the county will be able to afford the traditional 20% down payment in the next five years. Just about a quarter of millennials would be able to afford a 10% down payment, according to the survey.
