A College Degree Is Nearly Essential to Buy a Home in Coastal California

A college degree is almost a must-have for millennials who hope to eventually own a home in major Golden State coastal urban centers, but even with a diploma, young Bay Area buyers can expect to save for more than 15 years to meet the traditional down payment amount.grads

In a new study, Trulia examines how student loans affect millennials’ abilities to amass a 20 percent down payment and the length of time needed to do so. The company found that student debt does indeed temporarily impede the ability to save for a down payment and that a diploma is a necessity in expensive housing markets like the Bay Area.

California cities dominate Trulia’s list of the 10 markets where saving for a down payment takes the most years, regardless of whether the hopeful young buyer holds a college degree. San Francisco tops the list for longest savings period, with the average college-educated millennial requiring more than 29 years to squirrel away the $560,590 down payment. If that sounds like a long time, consider that San Franciscans without a college degree will never earn enough to put 20 percent down on a home in the city.

Trulia ranks the San Jose market No. 5 for longest savings period, with the average 25-30-year-old household requiring nearly 18 years to save the $289,072 down payment. San Jose residents without a degree can expect to wait nearly half a century — 45.4 years — to amass a 20 percent down payment.

In Oakland, which ranked No. 7 on Trulia’s list, buyers with a diploma can enter the market nearly twice as fast — 15.6 years to save $193,453 — as those without, who will take 27.3 years to save 20 percent of a home’s price. Other California markets that ranked among the top 10 for longest savings periods for college-educated millennials were Los Angeles (18.8 years), Orange County (18.5 years), San Diego (17.7 years), and Ventura County (15.5 years).

However, Bay Area buyers without college degrees can substantially shorten the savings cycle by cutting the down payment in half. A San Francisco resident who puts down 10 percent of the purchase price goes from never being able to own a home to being able to save the down payment in just under three decades. A 10 percent down payment in San Jose and Oakland can help those without a degree save for a home about three times faster: 15.4 years and 11.3 years, respectively.

A final — and likely far less attractive — option for California buyers without a degree who don’t want to wait a decade to save for a home is to consider relocating to Detroit or Dayton, Ohio, where it takes just over five years to sock away a 20 percent down payment.

(Photo: Flickr/State Farm)

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