Younger San Francisco renters have it even worse than they think in the home-buying market, at least according to a survey released by rental site Apartment List, which estimates that most millennial renters in the city will need far more time to save up for a down payment than they think.
In results published last week, Apartment List economist Christopher Salviati says he surveyed 6,400 Millennial renters—Salviati does not define what he means by “millennial” but the term usually covers those ages 22 to 37, according to Pew Research—to find out how many planned to buy homes, then compared their expectations to their nearest market.
The results were predictably depressing, but especially so for would-be SF homebuyers:
- For starters, things are rough all over. “Nine out of ten millennial renters want to purchase a home, but few plans to do so in the near term. Of those who say that they plan to purchase a home, just 4.9 percent say that they will do so within the next year. [...] 48 percent of millennial renters have zero down payment savings, while just 11 percent have saved $10,000 or more.”
- According to Apartment List’s math, it will be decades before younger renters can think about trying to buy. “We analyze millennial saving rates to estimate that two-thirds of Millennial renters would require at least two decades to save enough for a 20 percent down payment on a median-priced condo in their market. Just 11 percent would be able to amass a 20 percent down payment within the next five years.”
- Nationwide, San Francisco renters are some of the worst positioned to buy. Based on median prices from the National Association of Realtors and survey respondents’ data about how much they’re making and saving, 82.3 percent of SF renters will have to save for more than 20 years to buy. The only other market to break the 80 percent mark in this analysis is Denver, Colorado.
- Surprisingly, SF renters underestimate how steep the climb is. “In the San Francisco metro, the nation’s priciest market, the average survey respondent expects to need $99,300 for a down payment. [But really] a 20 percent down payment on a median-priced condo in the San Francisco metro requires the much larger sum of $175,180.”
- That disparity between expectation and reality is the largest gap in the country. Renters in every city in the survey underestimated how much money they would need to save, but SF’s reality gap is the widest. Even SF millennials’ low-end expectation of $99,000-plus is actually higher than the real cost to buy in every other city surveyed on Salviati’s list.
Note that when Salviati refers to “San Francisco” he’s actually talking about the larger SF-Oakland-Hayward metro area; the figures in SF proper are likely to be even worse.
According to the Mayor’s Office of Housing, median income for a single person household (any age) in SF in 2018 is $82,900.
And according to the real estate group Compass, the median price of an SF condo in October was about $1.2 million.
So, if a median SF earner puts away 20 percent of their monthly income, that $240,000 down payment on 20 percent of a condo would take about 173 months. Taxes not included.
Better start pinching those pennies now.
- 2018 Millennial Home Report [ApartmentList]
- Area Median Income [Office of Housing]
- SF Market Trends [Compass]