The biggest hurdle to home ownership for many potential buyers isn’t the monthly mortgage bill, but the steep down payment. 20 percent required to qualify for a typical mortgage on a median-priced home in the United States (roughly $455,000) comes to about $91,000 — an impressive pile of cash.
It would take most households years to save that much, but a recent study by RealtyHop they dug deeper, comparing local median home prices and incomes to find where the down payment could be built up the fastest. Approximately 1.8 million RealtyHop listings in the 150 largest U.S. metropolitan areas were examined and a savings rate of 20 percent of gross income per year was applied to the formula. Single-family homes, townhouses, apartments and cooperatives were included.
It’s not as simple as earning more, because the places where households earn the most also tend to have the highest house prices. Consider San Francisco, where the average household earning $126,187 a year would need 10.5 years to save the required $265,000 down payment on a median-priced home that costs $1.325 million. Three other California metros – Long Beach, Los Angeles and Glendale – require even more time to save.
But not everywhere it takes decades. In one third of the 150 meters, saving for the deposit would take less than five years. If you’re in a hurry, consider Detroit, the metro where savings have been building the fastest. There, the median household earning $34,762 would need just two and a half years to save a $17,780 down payment on a median-priced home that costs $88,900.
This week’s chart, based on RealtyHop data, shows the 10 metros where savings would be the fastest and the 10 where it would be the slowest.
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