Millennials Want to Buy Homes, But They’re Held Back by One Crucial Thing

Student loan debt is really hampering millennial homebuyers.
  • Millennials face very uncertain prospects of owning a home in the future.
  • According to a new survey, nearly half of millennials have no savings for a down payment.
  • Student loan debt is pushing homeownership even further out of reach for this generation.

Owning a home has long been part of the American Dream, a defining characteristic of the middle class. However, the prospect of homeownership for millennials looks uncertain and is hardly the assumed pillar of American life that it used to be.

The proportion of U.S. households renting has increased steadily over recent years, particularly in the wake of the 2008 housing crash and subsequent financial crisis. According to Census Bureau data, the percentage of renter-occupied households rose from around 33 percent to over 36 percent between 2009 and 2017.

In addition to that trend, millennials are increasingly maintaining their status as renters due to the constraints of the housing market’s affordability. There are two main factors driving this affordability problem.

Saving for the Down Payment

The two biggest culprits putting homeownership out of reach for millennials are their student loan debt burden and the difficulty they’re having saving for the down payment. The first problem has a direct impact on the second.

According to a survey by ApartmentList, 62 percent of millennials said their biggest obstacle to buying a home was the down payment — with the second-biggest obstacle, bad credit, lagging 24 percentage points behind it. Perhaps more troubling? Two-thirds of millennial renters will need more than 20 years to save for a 20 percent down payment on a house.

There are definitely affordable states for millennials where saving for that 20 percent down payment is a more reasonable expectation. Below you’ll find some of the most affordable states for millennials to own a home.

StateMedian Listing PriceMortgage Down Payment (20%)
West Virginia$159,000$31,800
Ohio$164,900$32,980
Iowa$169,900$33,980
Arkansas$172,000$34,400
Indiana$179,000$35,800
Michigan$179,900$35,980
Mississippi$179,900$35,980
Missouri$179,900$35,980
Kansas$179,950$35,990
Oklahoma$183,000$36,600

Source: Zillow 

Though down payments in these states are more achievable, there is another factor to consider: The populations of many are barely growing — and some are declining. According to the Census Bureau, West Virginia has experienced an outright loss of 2.5 percent of its residents between 2010 and 2018. Fortunately, many of these states include metro areas that are dynamic and attractive to millennials, such as Kansas City, Missouri, or Fort Wayne, Indiana — both of which are some of the best cities to own investment property.

Repaying Student Loan Debt

Millennials are greatly impacted by recent increases in student debt, which makes it even more difficult to save for the down payment. According to the New York Federal Reserve, student loan debt rose by $37 billion in the third quarter of 2018, reaching a current total of $1.44 trillion.

According to the ApartmentList survey data, on average, millennials with a college degree and no student loan debt have $10,397 saved for a down payment. By contrast, those with a college degree and student loan debt have just $3,613 saved.

Similarly, ApartmentList estimates that nearly 23 percent of millennials with a degree but no student loan debt can afford a 20 percent down payment within the next five years. For millennials with a college degree plus student loan debt, only around 12 percent could afford a down payment — thought the situation varies in states with the most and least amount of student loan debt.

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