If a typical millennial were to save every penny of their disposable income, it would take them four years to be able to put down a down payment on a house, according to new data.
That’s for an American 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 United States, according to analysis by real estate broker Redfin.
Typical millennials currently have about 26% of their income to save after covering expenses, up from 30% in 2020, according to Redfin calculations.
But despite the study’s projections, it will likely take many millennials more than four years to make a down payment. Saving all discretionary income for years is impractical, and the study uses average income, which tends to be higher than median income due to a small number of high earners affecting the results.
Additionally, millennials’ discretionary income declines with inflation, Redfin finds. Even though their average income has increased by 9.7% since 2020, rising costs for housing, food and gasoline have increased their spending by about 17%.
Rental costs have become particularly high, with median monthly rents up 13.5% year-over-year in July, according to data from Redfin.
However, one bright spot is that income tends to peak between ages 45 and 54, according to financial services site Bankrate, so millennials are likely to earn more as they age.
It is also possible that wage increases will eventually catch up with inflation. In the meantime, however, housing has only become more expensive for millennials.
“It’s a tough time right now for millennials,” says Redfin chief economist Sheharyar Bokhari. “But their long-term perspective is that they will make more money as they get older, become owners and become the main driver of the economy.”
To estimate the average income of millennials, Redfin used the US Bureau of Labor Statistics (BLS) earnings statistics for 2020, updated with recent wage growth data from the BLS. 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 house and rental prices.
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