$562,810 \u2014 a figure that\u2019s representative of the median home in the bottom third of home prices. Assuming a renter household is able to put aside 10 percent of their annual income, it would take a whopping 17.6 years to afford a 20 percent downpayment.\u00a0<\/span><\/p>\nIt now takes one year longer than it would have five years ago to squirrel away enough cash for a sizable downpayment. Of course, putting down 20 percent isn\u2019t a requirement for purchasing a home but it can save you thousands of dollars in mortgage insurance and interest over the course of your loan.<\/p>\n
A 2020 survey by the National Association of Realtors found that 7 percent was the median downpayment for first-time buyers who financed their home purchase. A lower downpayment can help you get into a home sooner, allowing you to build equity as the value of your home increases over time.<\/p>\n
To put all this into perspective, a 20 percent downpayment on the typical Los Angeles starter home with a mortgage rate of 3 percent would yield a monthly payment of $2,309, including tax and insurance. Angelenos who opt to put down 10 percent would fork over a monthly mortgage payment of $3,031, also including mortgage insurance.<\/p>\n
When grouped by metropolitan area (Los Angeles gets lumped in with Long Beach and Anaheim), the region has a savings time frame of 17.3 years for a 20 percent downpayment, assuming that renters put aside 10 percent of their income.<\/p>\n
Nationwide, San Diego is the only metro that ranked higher with a time frame of 17.4 years. Los Angeles was followed by San Francisco (17.0 years) and Riverside (12.9 years), prompting Zillow to comment that \u201crenters in California face the biggest barriers to saving for down payments.\u201d<\/p>\n
Across the country, the typical price of a starter home is $148,527, meaning it would take an average renter household about six years and five months to come up with a 20 percent downpayment while saving 10 percent of their annual income. Compared to 2016, it now takes a full year longer to reach that financial goal.<\/p>\n
Surging home prices are making it even harder for renters to get a foot on the property ladder.\u00a0 \u201cZillow forecasts 14.9% home value growth over the next year, which would mean renters need to save an additional $369 per month just to keep up with appreciation,\u201d wrote Zillow Economic Data Analyst Nicole Bachaud in the analysis.<\/p>\n
While these savings time frames can seem downright daunting for Californians, Zillow research indicates that roughly two-thirds of first-time buyers put down less than 20 percent on their first home. A quarter put down five percent or less to make the transition from renting to owning, dispelling the myth that 20 percent is the gold standard in today\u2019s real estate market.<\/p>\n
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<\/a>Photo: James Bombales<\/em><\/p>\n