Los Angeles
For Los Angeles millennials, homeownership remains a distant reality. According to a new report from Apartment List, 79% of millennials are not on a path toward homeownership. A portion of this group expects to rent forever, but 42% of millennials that want to own have not yet started saving a down payment. The reason is a combination of housing prices and a housing shortage, which work together to make homeownership a difficult achievement.
"On one hand, home prices continue to rise in Los Angeles, which means that the finish line is moving further away," Igor Popov, chief economics at the Apartment List, tells GlobeSt.com. "On the other hand, millennial renters are finding it very difficult to save for down payments. In L.A., 42% of millennial renters who want to buy a home have saved zero towards a down payment. To make matters worse, we find that millennials are expecting less financial support from family compared to last year."
Debt payments are also playing a role here. The report shows that 28%—versus the current 21%—of millennials would be able to save if debt payments went to savings. Even more, the economy could also play a role in the future of homeownership. "Whether or not millennials find themselves in a position to buy soon depends quite a bit on what the next recession looks like. Home prices may fall, but so will incomes," says Popov. "If the recession leads more millennials to move to lower cost metros, however, that may drive a significant increase in the number of millennials on track to buy."
While most millennials want to own a home, some don't. The report shows that 14% of millennials expect to rent forever. "Lifestyle preferences are important, but we find that affordability concerns are far and away the largest contributor to the expectations of forever renters. Of those who state that they are not planning to buy, 69% cited not being able to afford a home as a key reason," adds Popov.
Overall, this is good news for apartment owners, even if it doesn't bode well for the strength of the economy. "Given these trends, we expect demand in the rental market to remain strong, even as millennials continue to start families and rise up the income ladder," says Popov.
This dynamic could also mean a prolonged housing shortage in Los Angeles, and in turn, sustained housing affordability problems. "L.A. continues to be a tremendous job center and a place where millennials find opportunity," says Popov. "That said, affordable starter homes are very hard to find, even as multifamily inventory continues to grow. As a result, many young renters are finding themselves choosing between the prospect of homeownership and the benefits of staying in L.A."
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Kelsi Maree Borland
