Renters in expensive California markets can expect to spend more
than two decades saving for a 20 percent down payment on the median
valued home
- Rising rents and home values extend the amount of time it
takes to save up for a down payment on a home – it takes a typical
U.S. renter six years to save enough to put 20 percent down.
- Renters in 13 of the country's 35 largest markets can expect
to spend more than 10 years saving enough money to put 20 percent
down on the typical home.
- The typical U.S. renter spends 34 percent of their income on
housing.
SAN FRANCISCO, July 13, 2018 /PRNewswire/ -- Renters can expect
to spend nearly six and a half years saving for a 20 percent down
payment on a home, according to a new HotPads®
analysis.i
The median home value in the U.S. is $216,000, which means a 20 percent down payment
would be $43,200. If a renter making
the median income saves 20 percent of their income each month – as
financial experts recommend -- they would have enough for a down
payment in 77 months, which is nearly six and a half years.
Rising rental costs make it even harder for renters to save for
a down payment. Nationally, the median rent is $1,480 per month, up 2.5 percent from a year ago.
Experts recommend spending no more than 30 percent of income on
housing expenses, but the typical U.S. renter spends 34 percent of
their income on housing.
In the country's most expensive housing markets like
San Jose, Los Angeles and San
Diego, it could take renters 22 years to save up a 20
percent down payment on the median home, assuming they can afford
to set aside 20 percent of their income each month. Currently,
renters in these markets are spending more than 55 percent of their
income on rent.
Meanwhile, it will take a typical renter in Pittsburgh, Cleveland, Detroit and Indianapolis less than four and a half years
to save for a 20 percent down payment. Renters in these markets
spend 30 percent or less of their income on housing, making it
easier for them to save.
Rising rents aren't the only thing keeping renters out of the
housing market. With home values continuously on the rise, saving
for a 20 percent down payment becomes more difficult every month.
U.S. home values rose 8 percent over the past year and are
forecasted to rise another 6.5 percent over the next 12
months.ii
"Aspiring first-time buyers have to balance their current
housing needs with their dreams of homeownership before they can
think about saving for the future," said Joshua Clark, economist at HotPads. "Home prices
are outpacing incomes in many of the country's largest markets,
which makes saving for a home more difficult. On top of that, the
current generation of first-time buyers is dealing with
unprecedented levels of student debt, making the down payment a
major factor keeping young renters out of the housing market even
though many young people say they have ambitions to buy. While some
high earners may manage to save more than the recommended 20
percent of their income, or may have the good fortune of windfalls
such as family assistance, inheritance, or large bonuses, most
young adults struggle to save. Sustained increases in home values
and rents suggest that lower down payments may become more popular
as first-time buyers continue to be pinched on both sides of the
market."
While most home buyers expect to put 20 percent down on a home,
buyers can qualify for loans that require a much smaller down
payment. In 2017, about 29 percent of first-time buyers put down
between 3 and 9 percent on their home purchase.iii
Renters who save 20 percent of their monthly income can expect to
save enough for a 3.5 percent down payment – the minimum required
amount for most FHA loans -- on the median home in a year and two
months.
HotPads is a Zillow® Group-owned apartment and home search
platform for renters in urban areas across the United States. For more information on the
U.S. rental market, visit HotPads.com.
Metropolitan
Area
|
Median
Rent
|
Median
Home
Valueiv
|
20 Percent
Down
Payment
|
Median
Annual
Incomev
|
Share of
Income Spent
on Housing
|
Time
Spent
Saving for 20
Percent Down
Payment
|
Time
Spent
Saving for 3.5
Percent Down
Payment
|
United
States
|
$1,480
|
$216,000
|
$43,200
|
$51,784
|
34.3%
|
6 years, 5
months
|
1 year, 2
months
|
New York,
NY
|
$2,350
|
$428,200
|
$85,640
|
$64,316
|
43.8%
|
11 years, 11
months
|
2 years, 1
month
|
Los Angeles,
CA
|
$2,860
|
$644,900
|
$128,980
|
$57,319
|
59.9%
|
28 years, 1
month
|
4 years, 11
months
|
Chicago,
IL
|
$1,765
|
$219,700
|
$43,940
|
$55,406
|
38.2%
|
6 years, 6
months
|
1 year, 2
months
|
Dallas, TX
|
$1,650
|
$227,500
|
$45,500
|
$52,429
|
37.8%
|
7 years
|
1 year, 3
months
|
Philadelphia,
PA
|
$1,655
|
$227,300
|
$45,460
|
$56,204
|
35.3%
|
6 years, 4
months
|
1 year, 2
months
|
Houston,
TX
|
$1,575
|
$197,400
|
$39,480
|
$55,058
|
34.3%
|
5 years, 6
months
|
1 year
|
Washington,
DC
|
$2,155
|
$400,000
|
$80,000
|
$70,802
|
36.5%
|
8 years, 11
months
|
1 year, 7
months
|
Miami, FL
|
$2,000
|
$271,900
|
$54,380
|
$47,938
|
50.1%
|
11 years, 5
months
|
2 years
|
Atlanta,
GA
|
$1,435
|
$203,200
|
$40,640
|
$52,572
|
32.8%
|
5 years, 9
months
|
1 year, 1
month
|
Boston, MA
|
$2,390
|
$453,200
|
$90,640
|
$66,925
|
42.9%
|
11 years, 11
months
|
2 years, 1
month
|
San Francisco,
CA
|
$3,425
|
$949,800
|
$189,960
|
$71,303
|
57.6%
|
31 years, 6
months
|
5 years, 6
months
|
Detroit,
MI
|
$1,275
|
$154,100
|
$30,820
|
$53,298
|
28.7%
|
4 years, 1
month
|
9 months
|
Riverside,
CA
|
$1,915
|
$357,200
|
$71,440
|
$48,439
|
47.4%
|
14 years, 1
month
|
2 years, 6
months
|
Phoenix,
AZ
|
$1,450
|
$253,300
|
$50,660
|
$50,639
|
34.4%
|
7 years, 8
months
|
1 year, 4
months
|
Seattle,
WA
|
$2,210
|
$490,200
|
$98,040
|
$64,572
|
41.1%
|
12 years, 11
months
|
2 years, 4
months
|
Minneapolis,
MN
|
$1,650
|
$260,700
|
$52,140
|
$57,319
|
34.5%
|
7 years
|
1 year, 3
months
|
San Diego,
CA
|
$2,650
|
$584,100
|
$116,820
|
$57,707
|
55.1%
|
22 years, 7
months
|
4 years
|
St. Louis,
MO
|
$1,190
|
$160,400
|
$32,080
|
$50,311
|
28.4%
|
4 years, 6
months
|
10 months
|
Tampa, FL
|
$1,445
|
$203,700
|
$40,740
|
$47,140
|
36.8%
|
6 years, 11
months
|
1 year, 3
months
|
Baltimore,
MD
|
$1,745
|
$264,600
|
$52,920
|
$57,697
|
36.3%
|
7 years, 3
months
|
1 year, 4
months
|
Denver, CO
|
$2,085
|
$398,000
|
$79,600
|
$58,720
|
42.6%
|
11 years, 10
months
|
2 years, 1
month
|
Pittsburgh,
PA
|
$1,090
|
$140,600
|
$28,120
|
$49,697
|
26.3%
|
3 years, 11
months
|
9 months
|
Portland,
OR
|
$1,920
|
$389,800
|
$77,960
|
$56,603
|
40.7%
|
11 years, 8
months
|
2 years, 1
month
|
Charlotte,
NC
|
$1,360
|
$194,400
|
$38,880
|
$51,303
|
31.8%
|
5 years, 7
months
|
1 year
|
Sacramento,
CA
|
$1,925
|
$399,100
|
$79,820
|
$56,275
|
41.0%
|
12 years, 1
month
|
2 years, 2
months
|
San Antonio,
TX
|
$1,370
|
$184,200
|
$36,840
|
$47,263
|
34.8%
|
6 years
|
1 year, 1
month
|
Orlando,
FL
|
$1,485
|
$225,000
|
$45,000
|
$45,431
|
39.2%
|
8 years, 2
months
|
1 year, 6
months
|
Cincinnati,
OH
|
$1,210
|
$159,600
|
$31,920
|
$50,014
|
29.0%
|
4 years, 6
months
|
10 months
|
Cleveland,
OH
|
$1,190
|
$140,500
|
$28,100
|
$50,045
|
28.5%
|
4 years
|
9 months
|
Kansas City,
MO
|
$1,245
|
$179,700
|
$35,940
|
$50,598
|
29.5%
|
5 years, 1
month
|
11 months
|
Las Vegas,
NV
|
$1,375
|
$261,900
|
$52,380
|
$45,472
|
36.3%
|
9 years, 1
month
|
1 year, 7
months
|
Columbus,
OH
|
$1,395
|
$181,600
|
$36,320
|
$51,170
|
32.7%
|
5 years, 4
months
|
1 year
|
Indianapolis,
IN
|
$1,230
|
$150,800
|
$30,160
|
$49,135
|
30.0%
|
4 years, 5
months
|
10 months
|
San Jose,
CA
|
$3,635
|
$1,265,300
|
$253,060
|
$78,955
|
55.2%
|
35 years, 10
months
|
6 years, 4
months
|
Austin, TX
|
$1,725
|
$295,100
|
$59,020
|
$53,032
|
39.0%
|
9 years, 2
months
|
1 year, 8
months
|
HotPads
HotPads is an efficient rental search platform for urban areas
across the United States, with
features designed for competitive markets such as map-based search,
real-time notifications and detailed information on landlords and
property managers that help renters spend less time searching and
more time feeling excited about their next home.
Launched in 2005, HotPads is based in San Francisco and is owned and operated by
Zillow Group, Inc. (NASDAQ: Z and ZG).
HotPads is a registered trademark of Zillow, Inc.
i HotPads analyzed median rents, median home values
and median incomes to determine how long renters can expect to
spend saving for a down payment. This analysis assumes renters save
20 percent of the median monthly income each month for a down
payment.
ii Zillow Real Estate Market Reports, May 2018
iii Zillow Group Report on Consumer Housing Trends,
2017. https://www.zillow.com/report/2017/buyers/money-financing/
iv Zillow Real Estate Market Reports, May 2018
v Income data from the U.S. Census Bureau
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SOURCE HotPads