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How long would it take a renter to save up for a down payment in today’s market?

by Liz Hughes

It could take Houston-area renters more than seven years to save for a down payment in today’s market, and that’s no surprise, as starter-home prices are growing almost seven times faster than renter incomes, according to a new report from Zillow.

According to the report, it would take an average rental household about six years and five months to save enough for a 20% down payment on a typical starter home worth $148,500 — a full year longer than it would have taken to save for a starter home down payment five years ago. That’s if they save 10% of their income. 

In the Houston metro area, it would take an average renter saving 10% of their income 7.2 years to save enough for a 20% down payment on a typical starter home worth $173,750.

Zillow economic data analyst Nicole Bachaud says first-time homebuyers face more challenges in coming up with a down payment without having equity from a previous home sale. 

“In a housing market where prices are rising at record rates, especially when compared to renter incomes, the ever-increasing sum of a 20% down payment can feel out of reach,” she said in a press release. “The good news is that buyers who want to take advantage of today’s low mortgage rates can do so without putting a full 20% down — most conventional mortgages allow as little as 3% to 5%. That lower upfront payment comes with higher monthly payments, but the opportunity to build equity can outweigh those extra costs for many.”

First-time homebuyers could secure a mortgage with less than 20% down, according to the analysis, which found 64% of first-time homebuyers do just that, and 25% put down 5% or less, allowing them to save what they need in less time — an average of three years and three months to save up a 10% down payment and a year and seven months to save 5%.

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Comments

  • Charlie The Mortgage Duuude says:

    I don’t question the accuracy of the article, but I’d like to say that, in my 51 year career (no Geezer jokes, thank you very much), that I’ve seen less than a handful of first time homebuyers who have saved 20% of the purchase. I’ve seen tons of ’em with 3 and 3.5% down.
    BTW – if you sell to upscale buyers, my max comp limit is $5,000. Something to think about.
    Charlie

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