If a typical millennial were to save up every penny of their disposable income, it would take four years to be able to afford a down payment on a home, new data finds.
That’s for a U.S. millennial earning an average income of $85,233 and saving for a 20% down payment on a $413,000 home, the median price in the U.S., according to an analysis by real estate broker Redfin.
The typical millennial currently has about 26% of their income left over to save after covering expenses, down from 30% in 2020, according to Redfin’s calculations.
But despite the study’s projections, it will likely take longer than four years for many millennials to be able to afford a down payment. Saving all discretionary income for years on end isn’t practical, and the study uses average income, which tends to skew higher than median income due to a small number of high earners affecting the results.
What’s more, millennials’ discretionary income is shrinking with inflation, Redfin finds. Even though their average income has increased 9.7% since 2020, rising costs for housing, food and gas have increased their expenses by about 17%.
Rental costs have become particularly expensive, with median monthly rents up 13.5% year over year in July, per Redfin’s data.
However, one bright spot is that income tends to peak between the ages of 45 to 54, according to financial services site Bankrate, so millennials are likely to earn more as they age.
It’s also possible that wage increases will eventually catch up with inflation. In the meantime, however, housing has only become more expensive for millennials.
This is a rough patch right now for millennials.
Redfin senior economist
“This is a rough patch right now for millennials,” says Redfin senior economist Sheharyar Bokhari. “But their long-term prospect is that they will be making more money as they get older, get into ownership and become the main force driving the economy.”
To estimate the average income for millennials, Redfin used 2020 U.S. Bureau of Labor Statistics (BLS) income statistics updated with recent BLS wage growth data. Budget estimates were based on the BLS’s 2020 Consumer Expenditure Survey, which was then updated using recent Consumer Price Index data. Redfin used its own data for home and rental prices.
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