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Young people are flocking to big, expensive cities, according to data crunched by housing market information service RealtyTrac, and that might not be the greatest of ideas. If you look at the chart below, you’ll see that young folks are moving to the Washington D.C. area, which occupies three of the top 10 counties where high percentages of millennials are moving in. They are also moving to places like San Francisco, Denver, and New York. That’s probably not much of a surprise: Young adults go where opportunity is.

Percent change millenials chart

Opportunity is in the eye of the beholder, however. That second column up above helps explain why those young people aren’t buying houses, which is bad for them and for the economy. That’s the average down payment made for home purchases in those areas.  Not price, down payment. So in Washington D.C., the average buyer shows up with a wallet full of $100,000…or more.  Avert your eyes from that San Francisco entry there. Even in Denver, which is clearly not San Francisco, the average down payment is $43,000.

(Note: data corrected and chart updated since original post.)

Raise your hand if you knew where to get $275,000 when you were 25.  That’s certainly enough to keep young people up at night, and the kind of thing I’m following in The Restless Project. 

In the Seattle region, according to RealtyTrac data, King County saw a 34 percent increase in the millennial population between 2007 and 2013, and the average down payment was 18 percent or $71,125. Windermere Real Estate President OB Jacobi tells RealtyTrac, “This means buyers with low down payments are being outbid by cash buyers and those with higher down payments. And it will likely stay this way until the supply in Seattle starts to catch up with the demand.”

Mind you, these figures don’t represent *required* down payments. Plenty of folks are buying homes with far less cash.  There’s even a new HUD program that allows buyers to put down as little as 3 percent of the purchase price, as long as they are willing to pay higher fees.  The average figures are a bit lopsided by big-ticket purchases.  But nationwide, the average down payment is $31,000, or 14 percent of the home purchase price; while in the top 25 markets that are attracting millennials, the average down payment is more than twice that — $66,000 — with an average down payment of 17 percent. It’s hard enough to buy a home in a hot market without having to worry about being the low-down-payment bidder, which can hurt a buyer’s chances if there are multiple bids.

Taken together, it means that young folks — who remember, average some $30,000 or so in college debt — may not really find the opportunities they are looking for in America’s big cities. But there are alternatives.

Look back at the list above, and you’ll see some surprises, like Montgomery and Davidson, in Tennessee.  Average down payments are comfortably below the national average. And if you expand the chart a bit, you’ll find some interesting places with growing populations of young people, and affordable homes without the huge down payment barrier. In markets like Durham, N.C., Columbus, Ohio, Augusta, Georgia, and Des Moines, Iowa, average down payments range within a much more reasonable $15,000-$20,000. Near Fayetteville, N.C., average down payments are less than $10,000. In all those cities, the millennial population has grown at least 20 percent since 2007, according to RealtyTrac’s data, and median down payments are 14 percent or less.   Have a look at this chart:


That’s an interesting list of places.  Remember, it is possible to to get low-down-payment loans in places like New York and San Francisco, and that’s the right thing for many folks.  It’s also important to remember that such loans have their drawbacks, like big up-front fees  and/or mortgage insurance. And it’s important to at least consider some alternatives.

Bottom line: If you are weighing job prospects, don’t be fooled by a sexy six-figure salary. There are places in America where you can make a life, or at least start one, on half that amount.  Don’t count them out too quickly.

(To conduct the analysis, RealtyTrac analyzed purchase loan and sales data for single family homes and condos in 2014 in 386 counties nationwide, examining a total of 1.5 million loans.) 

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