Photo: Robert Clark
Saving for a downpayment is one of the biggest challenges facing first-time US homebuyers, according to a recent study by RealEstate.com, part of the Zillow Group.
Rising home prices, a fiercely competitive market and tight inventory have done little to encourage Millennials to stop paying rent and take the leap into homeownership.
Yet, despite these hurdles, there are metros where first-timers can save enough money for a 20 percent downpayment in as little as three years.
“In certain markets buyers can find some relief from high prices and tight inventory. They just need to know where to look,” writes RealEstate.com general manager Justin LaJoie, in a statement.
RealEstate.com examined the median household income and annual household savings among Millennials in 35 major metros to determine how long it would take to save for a 20 percent down payment on the typical starter home.
Chicago, Illinois ranked as the overall best metro for first-time homebuyers.
The metro has a median annual Millennial salary of $50,500, and with a median home value of $177,300 it would take just a little over three years to save enough for a 20 percent down payment.
This assumes, of course, the prospective buyer is putting $10,821 a year into savings.
Similarly, it would take a Millennial under 4 years to save enough to put down 20 per cent on a home in Dallas, Texas, Detroit, Michigan, Baltimore, Maryland, and Indianapolis, Indiana.
On the flipside, it would take first-time buyers over 13 years to save for the typical starter home in Portland, Oregon, one of the country’s hottest markets.
Unsurprisingly, many other red-hot markets topped RealEstate.com’s worst markets list: San Jose, California, Los Angeles, California, San Francisco, California, and Denver, Colorado.
“Deciding whether to buy a home is a personal choice and everyone’s financial situations and homeownership goals are different… We don’t advise trying to time the market, especially for a first-time buyer,” LaJoie tells Livabl.
Putting down less is certainly one way to shave a few years off the savings plan.
“Despite common beliefs, a 20 percent down payment is not a requirement for homeownership. Buyers who aren’t putting a full 20 percent down will have to pay a premium, most often in the form of Private Mortgage Insurance (PMI),” says LaJoie.
RealEstate.com recommends first-time buyers do their research and know how much they can realistically afford.
“There’s a lot of hidden costs associated with owning and maintaining a home that may come as a surprise to a first-time buyer,” says LaJoie.
Click here to read the entire release.