There’s been a lot of doom and gloom regarding rising home prices creating an ultra-competitive market that’s locking prospective first-time homebuyers out of homeownership. However, according to a new Zillow report, buyers shouldn’t discount the opportunities that still make homeownership accessible during this hot market.
How long does it actually take to save for a home these days? If an average renter household saves 10% of its income, it would take about six years and five months to save enough for a 20% down payment on today’s typical starter home, which is valued at about $148,500. Five years ago, it would have taken only five years, according to Zillow.
Here’s what homebuyers can consider:
Putting less than 20% down. This is becoming more commonplace. In fact, according to Zillow, a majority (64%) of first-time buyers do so, and one-quarter put down 5% or less.
Move to a low-cost area. With more remote work opportunities available, prospective homebuyers are no longer as limited by location and can move to a more affordable area to either purchase or rent and save. According to Zillow, this could be the difference between saving for a down payment for six years and eight months in Austin or saving for 28 years and three months in San Francisco, for example.
“Without the equity from a previous home sale, first-time homebuyers face more challenges in coming up with a down payment,” said Zillow economic data analyst Nicole Bachaud in a statement. “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. 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.”
To read the full report, click here.
Liz Dominguez is RISMedia’s senior online editor. Email her your real estate news ideas to lizd@rismedia.com.
