Saving for a down payment is one of the biggest hurdles to homeownership. However, a new analysis from RealEstate.com, a Zillow Group® brand, identifies 10 metros where first-time buyers may find it easier to save for their future home purchase, and 10 metros where it may be more difficulti.
In Chicago, a first-time buyer will need about three years to save a 20 percent down payment on the typical starter home – the fastest of the 35 metros analyzed. First-time buyers in Dallas, Detroitand Baltimore may also find saving for a down payment to take less time than in other metros – with the average millennial household needing just under four years to reach a down payment.
RealEstate.com’s analysis factored in the median household income among millennials (ages 24-36) and their estimated annual household savings to determine how long it would take to save for a 20 percent down payment on starter home — or a home priced within the bottom third of the market.
Since nearly half (44 percent) of buyers move outside of their current city with their home purchase, knowing which metros can help ease some of the down payment burden can be valuable for first-time buyers considering movingii.
In Portland, Ore., the estimated annual savings for a millennial household is $5,288 – nearly half of what it is in Chicago ($10,821). Less savings combined with higher home values means a first-time buyer in Portland would need to save for more than 13 years to reach a 20 percent down payment on a starter home – the longest of the metros analyzed. In Denver, San Jose, Calif., and Riverside, Calif., it would take more than 10 years to save a down payment.
While not everyone chooses to put down 20 percent on a home, it is a good goal to aim for, especially for a first-time buyer. According to Zillow Group’s 2017 Consumer Housing Trends Report, 37 percent of first-time buyers (45 percent of all buyers) choose to put 20 percent down or more on their home purchase.
“Contrary to popular belief, millennials want to buy homes, but high home prices, low inventory and stagnant wage growth are some of the many factors that may be driving would-be buyers into delaying homeownership,” says Justin LaJoie, RealEstate.com General Manager. “However, in certain U.S. housing markets first-time buyers can find some relief; they just need to know where to look.”
To help first-time buyers better understand the total cost of homeownership, RealEstate.com allows home shoppers to search based on homes’ “All-In Monthly Price,” which includes estimates for costs such as mortgage, property tax and utilities, giving them a more accurate picture of the cost of homeownership.