If you’re starting out, saving for a down payment on your first home can take a lifetime, depending on where you buy.
In the two largest US metro areas, a first-time homebuyer will need to save for at least 50 years, according to a new report by mortgage lender Rocket Mortgage. Those cities are New York and San Francisco, where it takes an average of 65 years and 57 years of savings to pay the average down payment, respectively.
“Saving a down payment takes years of practice, which is why getting the keys is a meaningful milestone,” Bill Banfield, Rocket’s chief business officer, said in a report.
“For anyone hoping to own a home one day, it’s never too early to understand what buyers are putting in your market and start building a plan.”
In 13 cities, first-time buyers will need to save for at least 20 years, the analysis found. But in several popular metros in the South and Midwest — including Detroit and Fort Worth, Texas — buyers can reach a down payment in five years or less.
Rocket’s analysis looked at nearly 50 major metros across the U.S. It calculated the required years of savings based on local home prices and the down payment trends of first-time buyers and assumed they save 5% of their annual income.
Down payment savings, by city
Low down payments remain a major barrier to homebuyers, according to the Harvard University Joint Center for Housing Studies. For first-time buyers, paying less can be a nightmare. That’s because these buyers are often younger, have less savings and can tap equity from the sale of an existing home to help pay for the purchase.
The prospect of saving for decades for a down payment can be daunting. But there are ways to avoid that roadblock. And they are usually available locally.
|
Metro |
Years of Saving for a Down Payment |
Average Down Payment for First Time Buyers ($) |
Average Down Payment (%) |
Median Home Price for First Time Buyers |
|---|---|---|---|---|
| New York, NY | 65.2 | $265,000 | 30% | $883,333 |
| San Francisco, CA | 57.2 | $400,000 | 26.60% | $1,501,466 |
| Los Angeles, CA | 41.5 | $170,500 | 20% | $852,500 |
| Boston, MA | 37.8 | $185,000 | 22.60% | $819,573 |
| Anaheim, CA | 33.6 | $170,000 | 20% | $850,000 |
| San Jose, CA | 33.6 | $249,000 | 22% | $1,113,595 |
| San Diego, CA | 25.8 | $143,500 | 20% | $717,500 |
| Oakland, CA | 25.4 | $130,000 | 20% | $650,000 |
| Washington, DC | 23.6 | $129,500 | 20% | $647,500 |
| Austin, TX | 21.2 | $95,700 | 20% | $478,500 |
| Seattle, WA | 21.2 | $125,700 | 20% | $628,500 |
| Nassau County, NY | 21 | $150,000 | 20% | $750,000 |
| Providence, RI | 20.6 | $63,750 | 15% | $425,000 |
| Nashville, TN | 15 | $60,200 | 15.80% | $379,954 |
| Portland, OR | 13 | $59,670 | 12.80% | $467,928 |
| Miami, FL | 12.9 | $42,745 | 7.70% | $556,155 |
| Denver, CO | 12.8 | $59,000 | 12.70% | $466,100 |
| New Brunswick, NJ | 10.2 | $58,500 | 15% | $390,000 |
| Montgomery County, PA | 10 | $56,000 | 18.60% | $301,399 |
| Sacramento, CA | 9.9 | $45,407 | 10% | $454,065 |
| Charlotte, NC | 9.3 | $40,000 | 10% | $400,000 |
| Philadelphia, PA | 9.1 | $27,275 | 10% | $274,750 |
| Chicago, IL | 8.7 | $35,125 | 10% | $351,250 |
| Newark, NJ | 8.6 | $25,102 | 6.20% | $404,574 |
| Tampa, FL | 8.5 | $35,625 | 10% | $356,250 |
| Dallas, TX | 8.4 | $31,225 | 9.40% | $333,002 |
| Cincinnati, OH | 8.3 | $23,500 | 8.10% | $289,917 |
| Riverside, CA | 8.1 | $36,600 | 5.40% | $681,232 |
| Saint Louis, MO | 8.1 | $21,675 | 9.90% | $218,189 |
| Orlando, FL | 7.9 | $30,750 | 8.80% | $350,813 |
| Minneapolis, MN | 7.1 | $27,500 | 7.90% | $347,806 |
| Atlanta, GA | 6.8 | $29,970 | 9.60% | $310,817 |
| Phoenix, AZ | 6.6 | $28,000 | 6.20% | $449,198 |
| Houston, TX | 6.4 | $20,512 | 7.30% | $282,105 |
| Baltimore, MD | 6.2 | $20,000 | 7.70% | $260,917 |
| Kansas City, MO | 6.2 | $21,750 | 7.30% | $298,399 |
| Pittsburgh, PA | 6.2 | $20,715 | 9.10% | $226,817 |
| Las Vegas, NV | 6.1 | $23,886 | 5.30% | $447,471 |
| San Antonio, TX | 5.6 | $18,628 | 7.20% | $258,948 |
| West Palm Beach, FL | 5.3 | $19,569 | 5.70% | $344,521 |
| Cleveland, OH | 5.1 | $11,148 | 5.30% | $209,758 |
| Columbus, OH | 5.1 | $17,001 | 6.50% | $262,121 |
| Jacksonville, FL | 4.7 | $17,121 | 6.20% | $277,717 |
| Indianapolis, IN | 4.4 | $14,600 | 5.60% | $261,273 |
| Milwaukee, WI | 4.4 | $12,375 | 5% | $247,500 |
| Fort Worth, TX | 4.3 | $17,867 | 5.80% | $306,589 |
| Virginia Beach, VA | 4.3 | $20,450 | 6.30% | $323,993 |
| Detroit, MI | 3.9 | $7,600 | 5% | $152,000 |
| Warren, MI | 3.1 | $8,797 | 5% | $175,940 |
Nationally, the median pay is now $64,000, according to Redfin. As a percentage, that translates to 15% of the average sales price. But that image can vary greatly from city to city.
In Rocket’s analysis, the time it takes to save for a down payment isn’t just a reflection of local housing prices. The rating also takes into account local income and the average down payment percentage in each market.
In New York, for example, not only are housing prices high, but the average down payment is 30%. Rocket noted that the percentage is very high because condo associations in the city often have strict rules that require a down payment of between 20% and 30%.
Lower capital payments can also reflect a more competitive housing market. Increasingly, first-time buyers have to compete with buyers with all the money, which can lead to very low fees across the board.
However, a large down payment is not always necessary. In fact, low single-digit fees are the norm in about two dozen major cities, including Miami, Atlanta and Pittsburgh.
Down payment assistance programs are another important way to help first-time buyers pay for a home. The Urban Institute has identified more than 1,600 such programs across the country. Some programs offer publicly funded grants with no strings attached, while others extend interest-free loans that are second-lien loans.
One notable option available nationwide is the Neighborhood Assistance Corporation of America, a nonprofit housing group that runs a homebuyer program that boasts no down payments and discounted loan rates.
