Reports: First-time buyers need one more year to save 20% down payment, compared to 5 years ago

NASHVILLE, Tennessee (WKRN) – As younger generations continue to look to the hustle and bustle of city life in popular U.S. markets, rising home prices are deterring a number of potential buyers, especially first-time buyers or low income families.

Zillow tenants found will need to save an additional $ 369 per month over the coming year just to keep up with the expected growth in home values.

For many, this is a car payment and saving it takes both effort and time.

Some start with less, some start with more, but for all, getting started is usually the hardest part.

“It can be done; it’s easy if you just define it,” said Maria Holland, real estate agent for RE / MAX Homes and Estates, Lipman Group.

chief economist for CoreLogicDr. Frank Nothaft notes that 82 percent of consumers see housing affordability as a key issue as house prices hit record highs, with year-over-year price increases peaking. high level since 2005.

“The big hurdle is that cargo of cash you need up front,” Dr Nothaft said.

The problem is that the boat’s money load continues to grow. First-time buyers today need a year longer to save for a 20% down payment than they did five years ago, Zillow found.

“It would be one thing if your income, your salary, increased by 15 percent a year,” said Dr Nothaft. “Well, it’s not, not by far and yet the amount of money you have to save is 15% more this year than last year because of the [home] price increase. “

According to Zillow, starting home values ​​are increasing nearly seven times the monthly rate of growth in renter incomes.

If we look at the calculations (keep in mind that these are national medians and there is huge variation from market to market), that would require a typical tenant income of around 4,000. $ per month, saving at the typical 2.4% tenant rate for about a quarter of a century to save for a 20 percent down payment on a typical American starter home, at about $ 150,000.

Source: Zillow

The problem in Nashville Holland is that starting homes cost around $ 340,000, not $ 150,000, which means Nashville people need to save even more!

“I think we spend $ 200 so many times on a good night out and do it several times a month,” Holland said. “Take out a couple of them and all of a sudden you’re saving $ 400 in a month.”

For those who are able to do this and save about 10 percent of their income, Zillow estimates that it would take 6.4 years to put 20 percent on a home and just under a year to save for a three percent down payment.

Holland recommends getting a conventional loan and paying at least five percent into it.

“Then we get into these multiple offers, so it’s over what their 20% would be,” Holland said.

The good news for home buyers, a 20% down payment is not required. In fact, Zillow found that a quarter of consumers are giving up five percent or less, and in today’s market that’s perfectly fine because interest rates are so low.

“The purchasing power is enormous because the interest rate is now around 2.875%. It’s historically low, like in the 1940s, it was maybe 4 percent, ”Holland said. “You increase the interest by one percent and it really changes your payment. “

Holland says saving, of course, is important, but she urges potential buyers to have at least three lines of credit and try to pay off some student debt before applying for a home loan, as it can have an impact. considerable on your purchasing power.

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