Homeownership could be out of reach for the average millennial, at least for a little bit longer, following the financial setbacks brought on by the coronavirus pandemic.
A realtor.com study shows that it will take the average millennial nine months to recoup a single month’s worth of expenses. That’s likely to delay their homebuying plans, particularly in cities like Atlanta, Nashville, San Francisco, Seattle and Denver.
It would take the average millennial four years to recover from six months of having no income. That assumes a savings of 10% of their take-home pay. The report noted that the 20-year national savings rate average was 6%, but that has more recently jumped to 33%.
The analysis assumes that the monthly household expenses of the average millennial are $3,770, as opposed to the median monthly household income of $4,240.
“This could delay their home purchase by years,” said Danielle Hale, chief economist at realtor.com. “Homeownership has already been delayed for many millennials and the coronavirus could push the timetable even further out for some.”
Millennials also now are facing more stringent lending standards — including some banks that are requiring 20% down — which may mean they’ll need even more savings in order to purchase a home. “With a national median listing price of $320,000 in April, a 20 percent down payment would be $64,000,” the report noted, adding that every additional 10% adds 6.5 years of savings needed for a downpayment.
“Most young buyers purchase a home with much less than a 20% down payment, and while these loans are still technically available, finding a lender willing to make one may be more challenging,” Hale said.