Fascinating new research on just how long it might take you to save up enough to cover the down payment on a new home. Coming up with that coveted down payment remains the first step toward homeownership for most American consumers.
The research data was obtained in a nationwide poll of over 7,000 prospective homebuyers by Point2, an online firm covering real estate trends.
First, the bad news. Without help from your family, if you are the typical Gen Z’er in pricey Irvine, California, it will take you 94 years – longer than you are expected to live – to sock away enough money for a down payment to buy a house.
Gen Z’ers (age 24 or under) are just starting out in their careers and have lower income than other demographic groups, and the median home price in Irvine is over $900,000.
But don’t despair. It will take you only 11 years of saving to buy a home in Denver, with a median home price of $422,000.
The news is slightly better for millennials (ages 25 to 44). If they bank 17% of their income each year, it will take them only 8 years to save up for a down payment in Miami, Florida (median home price $345,952).
Members of Gen X (ages 45 to 54) are more flush, but it will still take them almost 13 years to buy in San Francisco, although less than 4 years in Charlotte, North Carolina.
Younger baby boomers (ages 55 to 64) will need almost 8 years to plunk down a 20% down payment in Seattle, Washington, but less than 4 years to afford St. Petersburg, Florida.
You can check out the interactive results by generation and city on the Point2 website.
Here are some of the most important takeaways from the research:
It will be hard for younger generation savers to come up with a down payment on their own. Many will need family gifts or loans to make the transition to homeownership.
Costs vary dramatically by region. If you can’t afford what you want in one area, be prepared to relocate. That’s now a real possibility in today’s #WFH environment. While many cities are priced too high for most buyers, homes in Detroit, Cleveland and Buffalo are very affordable.
Many potential homebuyers have unrealistic expectations about what kind of down payment is needed, and they are not saving enough to reach their home-ownership goals. Almost half of all survey respondents have $10,000 or less saved toward a down payment, and currently tight market conditions – and the super hot housing market – could work against them.
“Americans across all generations will have to struggle for decades to save for a down payment in many cities,” concludes financial editor Mike Consol of Real Assets Adviser. Down payments in 17 large U.S. cities are running $100,000 to $200,000 for median-priced homes. That’s a stretch for even well-off Americans.