Many Millennial renters in metro Phoenix want to buy a home.
But they can’t afford a 20 percent down payment, and it will take them more than a decade to come up with it, according to a new survey.
It’s no revelation that Millennials are caught between rising rents and home prices. Just ask any young Valley renter who is trying to save to buy.
The Apartment List survey says it will take a Valley Millennial 13 years to save for a 20 percent down payment. That number shocked me, as well as the Millennials I talked to.
Adrian Zaragoza, 29, who rented in downtown Phoenix for a few years before buying a condo in Portland on the Park in March, thinks his friends and peers can come up with the down payment faster than the time the survey specified.
He opted to go with a smaller down payment than 20 percent, something many other Millennials can do as well.
“I made the decision to utilize a low-down option in order to continue with my savings and investment goals,” Zaragoza told me. “I am meeting many individuals my age that are equally savvy with their finances.”
He drove an older car with no payments for the past decade to partly save for his down payment.
The bright spot in Apartment List’s research is that Valley Millennials shouldn’t need to save for a downpayment as long as their cohorts in some desirable California locales: at least 20 years in Los Angeles, for example.
But Valley renters have to save a few years longer than young buyers in Atlanta, Miami and Las Vegas, says Apartment List.
The apartment research firm’s formula is based on home prices, incomes and savings for Millennials in major U.S. cities.
Apartment List surveyed about 24,000 U.S. renters, including a few thousand in the Valley.
Here’s what else the apartment research firm says about metro Phoenix Millennials:
- About 83 percent say they plan to purchase a home in the future.
- But 75 percent of those who plan to buy are waiting because they can’t afford to now.
- Millennials in Phoenix will take an average of 13.3 years to save enough for a 20 percent down payment.
- In Phoenix, a 20 percent down payment on a median-priced condo is $27,440.
- Valley Millennials estimate they will need about 20 percent less to buy than Apartment List does. Compare that to young potential homebuyers in Nashville; Charlotte, N.C.; and Denver; who estimate they will need only about half of the money it takes for a 20 percent down payment in their cities.
- Some Millennials will need to come up with 20 percent down payments to buy, but many won’t.
FHA loans for first-time buyers require down payments of less than 10 percent and sometimes under 5 percent of what a house costs.
Also, there are some programs in Arizona that help Millennials making below $90,000 to come up with a 4 to 5 percent down payment. VA loans for military members require no down payment.
Apartment List’s outlook for many Millennials wanting to buy is pretty gloomy.