Like many Millennials, you successfully made it through four years of college, and finally snagged that degree that your parents told you was so important to get. So, what’s next? Most major expectations include getting your first job (hopefully in the field you studied for), finding that special someone, and then perhaps settling down to pop out those requisite two and half kids. So, what’s missing here? Probably that first home purchase.
How many recent college grads have enough money to buy a home? Considering many of the hot neighborhoods Millennials are flocking to, what’s available to them, as first-time home buyers, are condos that don’t come cheap. Think of places like Austin, Nashville, and St. Petersburg, where places start at $300k, and go up from there.
Studies have shown that the average Millennial is graduating from college with a heavy debt load (mostly student loans and credit cards) to supplement their expensive diploma. As a matter of fact, a recent article says the average household owes about $49,000 in student debt.
This combination of student loan and credit card debt, along with basic living expenses, leaves the typical millennial with little to free cash once the bills are paid. They don’t have extra cash to set aside, no money set aside to put down on a house. If you’re one of these Millennials, what do you do?
Have no Pride
If you’re like many of them, you slide on back to your parents’ house. You know, the parents. The ones you have been distancing yourself from for the last four years as you set up your own life. Unfortunately for many Millennials, graduating college means going back to your old home, with all your laundry and personal belongings piled up into whatever vehicle you’re driving at the time. A degree means it’s time to go back, knock on your parent’s door, and reclaim your old bedroom. Hopefully you get there in time before your Mom or Dad converts it into their hobby room, otherwise you might even end up in the basement. Actually, maybe that’s what you’d prefer this time around.
All kidding aside, let’s take a closer look why this is happening. If you are a college graduate, depending on your field of study, the average starting salary is around $50,000. Depending on what part of the country you live in, this will only take you so far. Average student loan debt carries a monthly payment of around is around $350. And the average college graduate monthly credit card payment is around $200. Add in the monthly living expenses of rent, car payment, insurance, utilities, etcetera, etcetera, and there’s just not a lot of extra money left to put towards savings.
The basic fact is, how is a Millennial going to accumulate the $10k or more in cash they’re going to need to buy that $300k condo or house. For many of them, the only way is to skip rent, and live under the parent’s roof for a while.
A Growing Trend
Is it smart for Millennials to do this? Most definitely. But it’s not a good sign. So, is this an actual trend, or just some sort of aberration? Statistics and more than a handful of articles floating around the web definitely indicates that this is happening more and more.
Millennial buyers on average have less income and resources to use towards buying their own home. They face an even greater challenge than the previous generation in getting into real estate ownership. But if they suck it up, move back home, and start saving, they can do it. Sacrificing a little on the lifestyle side is a smart way to set themselves up for success later on. It’s not something most would be proud of, but it’s a great way for them to solve the Millennial challenge.