SEATTLE, Oct. 23, 2018 /PRNewswire/ -- With homes
getting more expensive, it's taking longer and longer to save for a
down payment.
For someone making the median income and putting away 10 percent
each month, it would take just over seven years to save for a 20
percent down payment on the typical U.S. home, according to a new
Zillow® analysisi. It hasn't taken this long to save for
a down payment since early 2008, shortly after home values hit
their highest point during the mid-2000s housing bubble.
Home values have seen strong, steady growth since the housing
crisis, and nationally the typical home is worth more than ever.
Although home value appreciation has slowed in recent months, homes
are still gaining value faster than incomes are growing. Saving for
a down payment is one of the biggest barriers to owning a home,
according to the Zillow Housing Aspirations Report, and when home
values outpace incomes, it gets steadily harder to reach that
goal.
Twenty years ago, it took 5.5 years to save for a 20 percent
down payment. Since then, home values have grown nearly twice as
much as incomes have, increasing by 98.6 percent, while incomes
have risen 52.6 percent.
"The simple fact that home values have far outpaced income
growth, lengthening the time needed to save for a down payment,
contributes to millennials' struggles to enter homeownership.
Saving up for a down payment can be tough, especially when the cost
of everyday life outpaces the money you put into the bank. It
requires good budgeting and long-term planning. It's one reason why
more and more first-time home buyers are looking to family and
friends for financial help when coming up with their down payment,"
said Zillow Director of Economic Research and Outreach Skylar Olsen. "Slower rent growth in recent
months should create some more breathing space in renters' budgets,
but rents remain high by historic standards. Even if you don't have
plans to buy a home in the next year or two, it's not a bad idea to
start setting aside savings for a future home purchase. It's also
important to remember that there are many options for mortgages
requiring less than 20 percent down."
The length of time it takes to come up with a down payment
strictly from saving may be a factor in why 43 percent of the
typical down payment comes from saving over time, with buyers
relying on other sources such as the sale of a previous home or a
gift from family or friends for the restii.
Relying only on savings, it takes longest to save for a down
payment in San Jose, Calif.
Although the median household income is highest in San Jose ($118,061), it would take about 22 years of
saving to come up with a 20 percent down payment for the median
home, worth $1,287,600.
It's fastest to save for a down payment in Pittsburgh, where it takes 4.8 years to save
for a 20 percent down payment.
Metropolitan
Area
|
Years to Save,
Q2 1998
|
Years to
Save,
Q2 2018
|
Income Change,
1998-2018
|
Home Value
Change, 1998-2018
|
United
States
|
5.5
|
7.2
|
52.6%
|
98.6%
|
New York,
NY
|
7.2
|
11.4
|
57.4%
|
147.9%
|
Los Angeles-Long
Beach-Anaheim, CA
|
8.7
|
18.4
|
62.5%
|
244.5%
|
Chicago,
IL
|
5.7
|
6.4
|
43.4%
|
60.8%
|
Dallas-Fort Worth,
TX
|
5.4
|
6.8
|
50.4%
|
90.2%
|
Philadelphia,
PA
|
4.8
|
6.6
|
50.0%
|
104.8%
|
Houston,
TX
|
5.3
|
6.2
|
53.5%
|
78.0%
|
Washington,
DC
|
5.4
|
7.9
|
72.9%
|
152.7%
|
Miami-Fort
Lauderdale, FL
|
5.3
|
10.1
|
43.3%
|
172.4%
|
Atlanta,
GA
|
4.9
|
6.2
|
36.4%
|
71.5%
|
Boston, MA
|
7.0
|
10.5
|
72.8%
|
159.7%
|
San Francisco,
CA
|
10.0
|
18.3
|
92.8%
|
252.9%
|
Detroit,
MI
|
4.9
|
5.3
|
25.2%
|
34.0%
|
Riverside,
CA
|
6.4
|
11.5
|
56.9%
|
182.5%
|
Phoenix,
AZ
|
5.8
|
8.2
|
48.8%
|
111.7%
|
Seattle,
WA
|
7.4
|
11.7
|
76.2%
|
177.3%
|
Minneapolis-St Paul,
MN
|
4.7
|
6.8
|
52.6%
|
121.6%
|
San Diego,
CA
|
8.6
|
15.4
|
76.9%
|
217.4%
|
St. Louis,
MO
|
4.5
|
5.1
|
47.8%
|
69.5%
|
Tampa, FL
|
4.6
|
7.6
|
53.3%
|
156.1%
|
Baltimore,
MD
|
5.2
|
6.5
|
72.5%
|
114.2%
|
Denver, CO
|
6.4
|
10.3
|
63.7%
|
165.3%
|
Pittsburgh,
PA
|
3.8
|
4.8
|
66.7%
|
111.8%
|
Portland,
OR
|
7.0
|
10.6
|
66.1%
|
152.3%
|
Charlotte,
NC
|
5.0
|
6.2
|
48.0%
|
83.8%
|
Sacramento,
CA
|
6.9
|
11.7
|
60.4%
|
174.6%
|
San Antonio,
TX
|
5.4
|
6.3
|
61.3%
|
87.4%
|
Orlando,
FL
|
5.1
|
8.2
|
40.0%
|
128.0%
|
Cincinnati,
OH
|
4.9
|
5.1
|
49.7%
|
54.6%
|
Cleveland,
OH
|
5.5
|
5.2
|
34.3%
|
26.8%
|
Kansas City,
MO
|
4.7
|
5.6
|
47.7%
|
76.6%
|
Las Vegas,
NV
|
6.2
|
9.2
|
35.8%
|
100.8%
|
Columbus,
OH
|
5.3
|
5.8
|
50.9%
|
65.3%
|
Indianapolis,
IN
|
5.5
|
5.1
|
37.6%
|
28.5%
|
San Jose,
CA
|
10.6
|
21.8
|
93.3%
|
295.9%
|
Austin, TX
|
7.0
|
7.9
|
70.5%
|
90.9%
|
Zillow
Zillow is the leading real estate and rental marketplace
dedicated to empowering consumers with data, inspiration and
knowledge around the place they call home, and connecting them with
great real estate professionals. In addition, Zillow operates an
industry-leading economics and analytics bureau led by Zillow
Group's Chief Economist Dr. Svenja
Gudell. Dr. Gudell and her team of economists and data
analysts produce extensive housing data and research covering more
than 450 markets at Zillow Real Estate Research. Zillow also
sponsors the quarterly Zillow Home Price Expectations Survey, which
asks more than 100 leading economists, real estate experts and
investment and market strategists to predict the path of the Zillow
Home Value Index over the next five years. Launched in 2006, Zillow
is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG), and
headquartered in Seattle.
Zillow is a registered trademark of Zillow, Inc.
i This analysis is based on affordability data from
Q2 2018.
ii 2018 Zillow Group Report on Consumer Housing
Trends
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SOURCE Zillow