By Mike Winters -
CNBC
If a typical millennial saved every penny of their income after taxes, it would take them four years to come up with the money for a down payment on a home, according to a new data analysis.
The calculation was made based on the average salary of a US millennial ($85,233 a year), a
20% down payment and a $413,000 home, the median home price in the country, according to an analysis by real estate firm Redfin.
Currently, a typical millennial has around 26% of their income left over after covering their main expenses.
This amount was 30% in 2020, according to Redfin calculations.
Despite the company's estimates, however,
it will likely take many millennials more than four years to come up with a down payment
on a property.
Many don't have enough to save, and the study is based on median income, which tends to be higher than median income because results are clouded by a small number of high-earners.
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Additionally, millennials' after-tax income has shrunk with inflation, according to Redfin.
Even though your median income has increased 9.7% since 2020, rising housing, food, and gas costs have increased your spending by about 17%.
Rental costs have become particularly high: Median rent increased 13.5% in July 2022 from the same month in 2021, according to data from Redfin.
One silver lining, however, is that earnings tend to
peak between ages 45 and 54
, according to financial services site Bankrate, so millennials are likely to earn more as they get older.
It's also possible that wage increases will eventually match inflation.
In the meantime, however, housing has gotten more expensive for millennials.
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“This is a tough time for millennials,” said Redfin Senior Economist Sheharyar Bokhari.
“But in the long run they are likely to make more money as they get older, become homeowners and become the main driving force in the economy.”
To estimate the median income of millennials, Redfin used 2020 US Bureau of Labor Statistics data, updated with recent numbers on wage growth in the country.
The company used its own data to calculate home prices and rents.
