If homeownership is still considered part of the “American dream,” is a college degree a necessary component of buying a home?

The answer depends on where a college graduate wants to buy a home, but many recent graduates saddled with significant student loan debt may struggle to save for a down payment, according to a recent Trulia survey.

Although many millennials are choosing to go to college, lured by long-term job prospects and the potential for earning higher salaries, if they must fund their degrees with student loans, they will probably find it difficult to save up for a down payment for a certain period of time following graduation, the survey found.

If potential homebuyers save 10 percent of what they make each year to shore up the “ideal” 20 percent down payment, it should take them about eight years to reach that goal. But eight years is often not an accurate estimate because this calculation doesn’t factor in fluctuating home prices, changes in household income and, above all, student loan repayments that occur during that period, Trulia said.


The average college-educated American has about $26,000 in student loan debt, which translates into an average monthly payment of about $280 per month over 10 years, the company noted.

According to Trulia, a more accurate calculation method is to estimate how much home prices and household income change over time and calculate the point in time at which cumulative household savings equals the down payment required at that future time period. This calculation also factors in student debt repayment and how that takes away from a household’s saving power.

However, assessing some of these factors yields different results for potential homebuyers depending on whether they want to buy a home, Trulia said.

For example, in Detroit, college-educated adults aged 25 to 30 can save for a down payment in 4.1 years. Nearby in Ohio, it’s possible to save enough of a down payment in six years or less in many metropolitan areas, including Akron, Cleveland, Dayton and Toledo.

College graduates who prefer the bright lights of a big city face far more discouraging prospects, Trulia said. Those prospects are especially dim in California. For example, it will take 29.4 years for a 25- to 30-year-old household to save up a 20 percent down payment on a median-priced home in San Francisco, 18.8 years in Los Angeles, 18.5 years in Orange County, and 17.7 years in San Diego and San Jose.


Those results may be startling, but what’s even more intriguing about Trulia’s survey is that the 70 percent of young adults who didn’t have a college degree have about the same prospects in areas with modest home prices. These potential buyers lagged behind the college grads who want to purchase a home in Detroit or metro areas in Ohio by only about a year.

That gap widens significantly in larger metro areas, however. But according to Trulia, the outlook for millennials without a college degree isn’t totally bleak. It’s not uncommon for some buyers to put 10 percent down, which can get someone into a home in half the time.

For example, millennials without a college degree in San Francisco will actually be able to save for a 10 percent down payment in 28.5 years, compared to never being able to save for a 20 percent down payment.

Trulia conducted the survey online in May with more than 2,000 young adults.

Email Amy Swinderman.

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