Millennials are often criticized for taking longer to achieve traditional milestones like homeownership, but sluggish wage growth plays a significant role in holding back this generation.
Saving up a 20 percent down payment for a median-valued home takes at least a year and a half longer in 2018 than it did in 1988, translating to 7.2 years overall, according to Zillow's research. About 46 percent of first-time homebuyers, mostly Millennials, tap their savings to make their down payment, as opposed to the 35 percent share for repeat buyers.
Too, the market rate rent requires 28.1-percent of the median household income, more than the historical average of 25.8 percent. Compounding the issue is the 213 percent cost increase for a four-year degree at a public college that has taken place over the lifetime of Millennials, a generation especially encouraged by their elders to seek a traditional four-year degree.
Let’s say your parents saved 10 percent of their income in 1988, 30 years ago. At that time, that would have been $234 a month (the median household income at the time was $28,100). The median home value in the U.S. that year was $79,400. Keeping things simple, that would have meant a bit over five-and-a-half years (5.7) of saving for a 20 percent down payment ... The upshot is that higher rent burdens and higher student loan payments drive down the savings rate so that, in reality, we would expect it to take even longer than we’ve estimated for the typical millennial to save for that down payment. No wonder they need help.