Those Saving for a Down Payment can Afford a Home Nearly Three Years Sooner by Moving Back in with Mom or Dad, Hotpads Finds
It takes a typical renter in the U.S. eight years to save for a 20 percent down payment, compared to about five years for renters without housing expenses. You can shorten that time considerably by moving back in with mom and dad, according to an analysis from apartment and home search platform HotPads.
Housing expenses add two years and 10 months to the time it takes a typical renter to save for a 20 percent down payment on the median U.S. home.
In expensive markets like Southern California and the San Francisco Bay Area, saving for even a 10 percent down payment can take more than a decade.
The median home value is $225,300, meaning a 20 percent down payment is about $45,000.
If a renter earning the median annual income saves 16.5 percent of their income after accounting for housing costs each month – the typical rate of savings for U.S. rentersii – they would have enough saved after eight years.
A typical renter also spends about 34 percent of their income on housing. If a renter making the median income eliminated their housing expenses and increased their monthly savings proportionally, they would have enough saved for a 20 percent down payment on the median home after 5 years and 2 months – almost three years sooner than those who pay rent and save for a down payment simultaneously.
Saving for a down payment can be a significant barrier to homeownership, and rising rents can make it harder for renters to save.
Median rents have risen about 3% over the past year, while home values have grown 7.5%.
“Hello again, mom and dad”
Moving in with family can make it easier for renters to save, particularly in expensive markets where housing costs account for a larger share of incomes.
In San Jose and San Francisco, renters typically spend more than half their income on housing, and saving for a 20 percent down payment could take more than 38 years for a renter with the median income.
While a 20 percent down payment is often a goal, 60 percent of first-time buyers end up putting down less than 20 percent, according to the 2018 Zillow Group Consumer Housing Trends Report.
A typical renter looking to put 10 percent down on the median home ($22,530) needs four years to save for a down payment, while someone with the typical renter income and no housing expenses typically could save this amount more than two years earlier, after two years and seven months.
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