Melancholy Millennials Putting the Car Before the House

money choiceYoung people looking to buy their first home are likely to feel some level of financial discouragement when they enter the housing market.

Even for those who have healthy incomes and strong credit scores, the struggle to scrape together enough cash to cover the downpayment and closing costs is enough to confine many first-timers to the sidelines of the housing hunt.

Though most millennials (people born between the early 80s and mid-90s) say they want to buy a home, more than 1/3 of them have saved nothing for a downpayment, according to a recent Apartment List survey. The lack of savings can’t all be attributed to lavish living, but rather, it’s mostly due to stagnant salaries.

NAHB economists released a report earlier this year that showed since 2006, the 25- to 34-year-old age group had almost no income growth. Meanwhile the median income for older age groups grew by almost 11%.

Many first-time home buyers fall within this cash-strapped age group, which partly explains why their level of home buying activity continues to be sluggish.

If home shoppers feel dejected enough about their homeownership potential, they might be tempted to make other purchases that seem easier and almost as gratifying – like buying a new car. In 2015, millennials bought 4 million cars and trucks – accounting for 28% of the new car market – second only to baby boomers, according to J.D. Power.

Qualifying for a car loan might seem far easier than getting a home loan, but that sweet new ride – whether leased or purchased – will saddle its owner with a large monthly payment, or take a big enough bite out of his or her savings account to potentially derail their plans to buy a home for several more years.

Some first-time buyers may need a little extra support to keep their eyes on the real prize of owning a home.

National Homeownership Month officially kicks off next month. To help prepare housing industry professionals to promote the benefits of homeownership, NAHB has created a toolkit full of ready-to-use resources.

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