Over the past 18 years, home and rent prices have more than doubled while incomes for younger households, unable to keep pace, have risen by only 31 percent. In a quest to achieve the American dream (despite unfavorable market trends), millennials are turning to their parents for help with paying monthly rent or saving for a down payment, Apartment List says.
In a survey of 13,000 millennials, 7.9 percent of non-student millennials revealed they receive monthly assistance for their rent, with one in three saying their parents foot the entire bill. Another 17.1 percent expect financial help from family towards a down payment, with the parents of one in three millennials covering at least 30 percent of the down payment.
The rent is too damn high
It’s suggested that buyers and renters spend no more than 30 percent of their monthly income on housing costs, but 15 percent of millennials spend more than 50 percent of their income on rent.
Some parents (32 percent) are able to fully cover rental costs, while 16 percent are able to cover a little over half. Another 30 percent are able to pay anywhere from 10 to 50 percent of their child’s monthly rent, and 22 percent contribute under 10 percent.
A little over a third of millennials receive under $100 per month for rent costs while 10 percent of millennials receive more than $1,000 per month. Lastly, about 20 percent of millennials receive at least $700 per month from parents or family members.
When it comes to saving for a down payment, 20 percent of renters are expecting help from parents or other family members. Seventy-two percent of parents are covering at least 29 percent of the down payment, while another 24 percent are covering up to 99 percent. Only 4 percent of parents are paying in full.
A third of millennials expect to get $1,000 or less toward their down payment, and 15 percent expect $10,000 or more — just enough to cover 25 percent of a down payment for a median-priced condo. Four percent will receive at least $40,000 — enough to cover a down payment for a $200,000 home.
Apartment List senior research associate Sydney Bennet says incomes for millennial households need to double in order for them to be in the same position as earlier generations.
“For example, for a 30-year-old renter in 2016 to be in the same position as a 30-year-old renter in 2000, their income would need to rise by 61 percent (rather than 31 percent) to afford the same rental,” explained Bennet in an emailed statement to Inman. “For home purchases, their income would need to have risen 75 percent, instead of just 31 percent.”
Beyond exorbitant rent and home prices, Bennet says millennials have to deal with “huge leaps” in college tuition and subsequent student loan costs, which hinder their ability to become homeowners.
“Even renters who work in high enough paying jobs to afford rent in pricey cities such as San Francisco or New York may need years or even decades to save for a down payment,” she said.
How agents can help
Bennet says real estate agents can help millennial buyers and their parents by educating them about programs for first-time buyers that offer lower down payment options.
“Programs that offer lower down payments options can help first-time buyers become homeowners sooner because they’ll need less saved up,” she said. “We’ve found while many millennials may be able to afford the monthly mortgage costs, very few have saved enough for a down payment.”
“Especially for those without family to help with a down payment, being able to purchase a home for a 1 percent, 5 percent or 10 percent down is a good option.”
Furthermore, Bennet says real estate agents should be prepared for greater involvement from parents as well.
“Parents may want to see homes before their children put in an offer,” she said. “Some buyers may also have parents who can help provide an additional loan to purchase a price over the original price point, which is helpful information for an agent to know when working with first-time buyers.”