Forty-three percent of last year's home buyers
used a gift from family or friends to help with their down payment,
the most since at least 2018
- A median-income household would need to put 35.4% down to
afford the payments on a typical U.S. home.
- Five years ago, the typical U.S. home would have been
affordable to a median-income household with no money down.
- A typical home is affordable to a median-income household with
20% down or less in 10 of the 50 biggest U.S. markets.
SEATTLE, June 20,
2024 /PRNewswire/ -- To comfortably afford a typical
U.S. home, a home buyer making the median income needs to put down
nearly $127,750, or 35.4%, a new
Zillow® analysis shows. Five years ago, when mortgage rates were
hovering just above 4% and the typical home was worth about 50%
less, that home would have been affordable with no money down.
That $127,750 down payment is what
a household making the median income would need to put down when
purchasing a typical U.S. home — valued at about $360,000 — so that the monthly mortgage payments
take up no more than 30% of that household's monthly
income.1
The enormous gap between the down payment needed now and five
years ago underscores how the pandemic fueled a scorching-hot
housing market, and why the rise in mortgage rates in the time
since has cooled the market. Stubbornly high mortgage rates have
pushed both buyers and sellers to the sidelines. With so few homes
for sale, competition is stiff among the remaining buyers.
"Down payments have always been important, but even more so
today. With so few available, buyers may have to wait even longer
for the right home to hit the market, especially now that buyers
can afford less. Mortgage rate movements during that time could
make the difference between affording that home and not," said
Skylar Olsen, chief economist at
Zillow. "Saving enough is a tall task without outside help — a gift
from family or perhaps a stock windfall. To make the finances work,
some folks are making a big move across the country, co-buying or
buying a home with an extra room to rent out. Down payment
assistance is another great resource that is too often
overlooked."
To save up $127,750, it would take
a household making the median income about 12 years (assuming its
members save 10% of their income each month with a 4% annual
return). It's no wonder then that 43% of last year's buyers used a
gift from family or friends for at least part of their down
payment, the highest share since at least 2018.
There are still affordable pockets of the U.S. In 10 major
metropolitan areas, the typical home is affordable to a
median-income household with less than 20% down. Pittsburgh boasts the most affordable housing
market. A median-income household there could afford the monthly
payments on a typical home even with no money down.
California is on the other end
of the affordability spectrum. A median-income household in
San Jose would need to put down
more than $1.3 million to afford the
mortgage payments on a typical home — that's more than the typical
home is worth in every other major market. In Los Angeles, a median-income household would
need an 81.1% down payment ($780,203)
to afford the typical home, the highest in the country. This helps
explain why many California metros
have seen population losses since 2020, as long-distance movers
target areas with more affordable housing.
For those who qualify, down payment assistance can amplify
savings and help a buyer enter homeownership more quickly. In
Minneapolis, for example, the
average amount of down payment assistance available across the
metro is just under $22,750,
according to data from Down Payment Resource. A median-income buyer
in Minneapolis without down
payment assistance would need a 27% down payment to comfortably
afford the typical home. With $22,750
in down payment assistance, they would need to put 21% down.
"Homeownership is the primary source of net worth and
generational wealth for most Americans, and declining affordability
is making it harder for average earners to get their foot in the
door of an entry-level home. Luckily, there are more than 2,373
down payment assistance programs nationwide with at least one
program in every county and 10 or more programs available in 2,000
counties," said Down Payment Resource Founder and CEO Rob Chrane. "In fact, down payment assistance
providers have responded to the difficult housing market by
increasing the number of programs offered and expanding inventory
options with support for manufactured homes and owner-occupied
multi-unit homes."
Every for-sale listing on Zillow displays available down payment
assistance programs that a buyer may qualify for.
Metro
Area*
|
Typical
Home Value
|
Down Payment
Needed ($)
|
Down Payment
Needed (%)
|
Years to
Save**
|
Average Down
Payment Assistance***
|
United
States
|
$360,681
|
$127,743
|
35.4 %
|
12.0
|
~$17,000
|
New York, NY
|
$657,279
|
$494,795
|
75.3 %
|
27.4
|
$23,660
|
Los Angeles,
CA
|
$962,388
|
$780,203
|
81.1 %
|
36.3
|
$42,446
|
Chicago, IL
|
$321,897
|
$95,953
|
29.8 %
|
8.8
|
$9,811
|
Dallas, TX
|
$381,104
|
$152,586
|
40.0 %
|
12.9
|
$12,670
|
Houston, TX
|
$310,707
|
$76,825
|
24.7 %
|
7.9
|
$10,618
|
Washington,
DC
|
$568,862
|
$188,087
|
33.1 %
|
11.2
|
$20,161
|
Philadelphia,
PA
|
$362,204
|
$103,471
|
28.6 %
|
9.2
|
$12,690
|
Miami, FL
|
$490,088
|
$316,270
|
64.5 %
|
24.1
|
$20,623
|
Atlanta, GA
|
$387,471
|
$118,239
|
30.5 %
|
10.1
|
$10,796
|
Boston, MA
|
$701,349
|
$432,875
|
61.7 %
|
23.1
|
$28,359
|
Phoenix, AZ
|
$461,352
|
$186,012
|
40.3 %
|
14.8
|
$21,444
|
San Francisco,
CA
|
$1,183,272
|
$887,656
|
75.0 %
|
31.5
|
$58,035
|
Riverside,
CA
|
$584,710
|
$358,926
|
61.4 %
|
23.6
|
$32,312
|
Detroit, MI
|
$254,325
|
$24,132
|
9.5 %
|
2.8
|
$11,479
|
Seattle, WA
|
$753,414
|
$462,095
|
61.3 %
|
23.7
|
$26,533
|
Minneapolis,
MN
|
$378,924
|
$102,199
|
27.0 %
|
8.6
|
$22,738
|
San Diego,
CA
|
$958,266
|
$723,527
|
75.5 %
|
32.5
|
$41,377
|
Tampa, FL
|
$382,802
|
$181,195
|
47.3 %
|
16.6
|
$14,414
|
Denver, CO
|
$595,649
|
$300,970
|
50.5 %
|
18.7
|
N/A
|
Baltimore,
MD
|
$387,914
|
$100,641
|
25.9 %
|
8.5
|
$9,910
|
St. Louis,
MO
|
$253,559
|
$10,773
|
4.2 %
|
1.2
|
$8,315
|
Orlando, FL
|
$398,881
|
$192,533
|
48.3 %
|
17.0
|
$16,755
|
Charlotte,
NC
|
$386,371
|
$149,041
|
38.6 %
|
13.7
|
$12,372
|
San Antonio,
TX
|
$289,511
|
$92,158
|
31.8 %
|
9.7
|
$11,885
|
Portland, OR
|
$556,385
|
$296,427
|
53.3 %
|
19.8
|
$27,560
|
Sacramento,
CA
|
$586,875
|
$337,769
|
57.6 %
|
21.7
|
$29,044
|
Pittsburgh,
PA
|
$217,285
|
$0
|
0 %
|
0
|
$8,157
|
Cincinnati,
OH
|
$287,721
|
$59,573
|
20.7 %
|
6.4
|
$10,711
|
Austin, TX
|
$466,628
|
$209,333
|
44.9 %
|
14.7
|
$15,303
|
Las Vegas,
NV
|
$427,509
|
$198,306
|
46.4 %
|
17.6
|
$18,479
|
Kansas City,
MO
|
$307,032
|
$76,273
|
24.8 %
|
7.9
|
$11,526
|
Columbus, OH
|
$315,438
|
$84,215
|
26.7 %
|
8.5
|
$12,357
|
Indianapolis,
IN
|
$282,396
|
$27,570
|
9.8 %
|
3.1
|
$10,967
|
Cleveland,
OH
|
$230,536
|
$31,551
|
13.7 %
|
4.0
|
$9,524
|
San Jose, CA
|
$1,631,252
|
$1,320,275
|
80.9 %
|
36.2
|
$63,407
|
Nashville,
TN
|
$446,180
|
$203,325
|
45.6 %
|
16.7
|
$17,620
|
Virginia Beach,
VA
|
$351,095
|
$112,962
|
32.2 %
|
10.9
|
$10,217
|
Providence,
RI
|
$481,911
|
$257,453
|
53.4 %
|
19.0
|
$22,792
|
Jacksonville,
FL
|
$361,796
|
$116,974
|
32.3 %
|
10.8
|
$12,700
|
Milwaukee,
WI
|
$348,439
|
$137,086
|
39.3 %
|
13.4
|
$10,483
|
Oklahoma City,
OK
|
$235,815
|
$31,331
|
13.3 %
|
3.9
|
$9,442
|
Raleigh, NC
|
$449,514
|
$152,410
|
33.9 %
|
11.8
|
$16,814
|
Memphis, TN
|
$242,519
|
$30,852
|
12.7 %
|
4.1
|
$9,075
|
Richmond, VA
|
$372,080
|
$105,228
|
28.3 %
|
9.6
|
$10,896
|
Louisville,
KY
|
$258,557
|
$46,869
|
18.1 %
|
5.7
|
$10,935
|
New Orleans,
LA
|
$241,940
|
$46,138
|
19.1 %
|
6.0
|
$12,998
|
Salt Lake City,
UT
|
$549,373
|
$251,131
|
45.7 %
|
17.1
|
$19,751
|
Hartford, CT
|
$362,763
|
$129,585
|
35.7 %
|
11.0
|
N/A
|
Buffalo, NY
|
$262,616
|
N/A
|
N/A
|
N/A
|
$14,273
|
Birmingham,
AL
|
$255,033
|
$19,406
|
7.6 %
|
2.4
|
N/A
|
|
*Table ordered by
market size
|
|
**Assuming a
household saves 10% of its income each month with a 4% annual
return
|
|
***Source: Down
Payment Resource. The average amount of down payment assistance
that a qualified household could receive for the purchase of a
starter home.
|
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1Estimated monthly mortgage payments include
principal and interest based on the typical home value according to
the Zillow Home Value Index and prevailing mortgage rates according
to Freddie Mac, plus estimates for property taxes, homeowners'
insurance and maintenance.
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