Down Payment Blues
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, according to a new analysis from HotPads.
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 now spends 34 percent of their income on housing.
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.
HotPads is rental search platform for urban areas across the United States It is based in San Francisco and is owned and operated by Zillow Group. Find out more at hotpads.com.
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