As home prices continue to rise and rents remain expensive, saving for a down payment can feel like trying to hit a moving target. Although they have a desire to take the next step in life and become homeowners, first-time buyers (71 percent of whom are millennials) are experiencing the complexities of purchasing a home in an extremely competitive environment. According to Zillow Group’s most recent Housing Trends Report, 39 percent of millennial buyers find it difficult to save money for their down payments.
While a 20-percent down payment is not necessary, it’s a good goal to aim for, especially if you want to jump-start the process of building equity in a home. Thirty-seven percent of first-time buyers put down 20 percent or more on their home purchase, according to the Zillow Group Housing Trends Report.
Thirty nine percent of millennial buyers find it difficult to save money for their down payments.
Is every market a challenge for first-time buyers, or are there pockets of the country in which first-time buyers can save for a down payment and still enjoy a bit of financial wiggle room? To find out, RealEstate.com examined the top 35 metros in the U.S. The analysis factored in median household income among buyers ages 24 to 36, the cost of a starter home and a 20-percent down payment — and estimated annual savings.
And after all that number crunching, we pinpointed the 10 metros where first-time buyers can most quickly save for a down payment.
The Windy City is a great place for first-time buyers — it’s a tech hub, for one, and offers walkability, mass transit, a great foodie scene, a nonstop calendar of concerts and festivals and the gorgeous shore of Lake Michigan. Plus, Chicago offers that beloved urban vibe, minus the costs associated with cities like LA and NYC.
Annual family income (24- to 36-year-olds): $50,500
Annual savings: $10,821
Median home value, entry level: $177,300
20-percent down payment: $35,460
Years to save: 3 years, 3 months
Dallas-Fort Worth, Texas
Dallas-Fort Worth has the fastest-growing job market in the U.S., says the Bureau of Labor Statistics. And the region’s population growth outpaces that of any other area in the country, says the U.S. Census Bureau. And yet, the region has somewhat slipped under millennials’ radars — so much so that the Dallas Regional Chamber recently launched a “Say Yes to Dallas” recruitment initiative. Maybe it’s time to give Dallas a second look.
Annual family income (24- to 36-year-olds): $50,600
Annual savings: $10,843
Median home value, entry level: $185,400
20-percent down payment: $37,080
Years to save: 3 years, 5 months
The Detroit metro didn’t benefit much from the mid-2000s housing boom and has been slow to recover from the Great Recession. But these days, mention Detroit and folks will start talking about the rebirth of downtown — urban gardens, breweries, the revitalized riverfront, tree-lined streets and a new streetcar system.
Annual family income (24- to 36-year-olds): $43,100
Annual savings: $5,388
Median home value, entry level: $96,700
20-percent down payment: $19,340
Years to save: 3 years, 7 months
Since 2010, Baltimore has added thousands of residential units to accommodate the growing number of millennials migrating to its core. The metro has a lot of desirable features — you can walk, bike share or hop the area’s free transit service, the Charm City Circulator, to get just about anywhere. And the cost of living is crazy good, compared to nearby urban areas like NYC. Another reason to make the move? Baltimore offers dozens of homeownership incentives, from tax breaks to renovation assistance.
Annual family income (24- to 36-year-olds): $54,300
Annual savings: $11,636
Median home value, entry level: $214,000
20-percent down payment: $42,800
Years to save: 3 years, 8 months
Thanks to a growing tech sector, Indianapolis is now among a handful of cities vying for the coveted “Silicon Valley of the Midwest” title. And with low cost of living and affordable housing — plus revitalization efforts like an urban bike and pedestrian path connecting neighborhoods to cultural districts and entertainment — Naptown is a great option for millennials seeking a place to settle down.
Annual family income (24- to 36-year-olds): $39,400
Annual savings: $6,567
Median home value, entry level: $122,500
20-percent down payment: $24,500
Years to save: 3 years, 9 months
The Steel City often finds itself included in “best cities for millennials” lists. (CNBC, Apartment Therapy, Niche and Apartment List are among the sites to sing its praises.) Why is it suddenly a crowd favorite? The metro has morphed into a modern urban center, with a killer bar and restaurant scene. The job market is strong, and the cost of living is absolutely do-able. And it doesn’t hurt that tech giants Apple, Facebook, Google and Uber have a presence in the area as well.
Annual family income (24- to 36-year-olds): $41,700
Annual savings: $5,212
Median home value, entry level: $103,600
20-percent down payment: $20,720
Years to save: 4 years
Cleveland offers residents a great bang for their buck — the housing market is relatively affordable compared to other major metropolitan cities, and it has a growing job market, especially in the biotech and IT fields. The median home value in Cleveland is lower than the national average, making it an attractive option for first-time buyers who don’t have the cash from a home sale to put toward a down payment. Cleveland also has a pretty stellar startup community: Both business.org and Popular Mechanics have included the metro area in their lists of top startup cities.
Annual family income (24- to 36-year-olds): $42,900
Annual savings: $5,362
Median home value, entry level: $109,600
20-percent down payment: $21,920
Years to save: 4 years, 1 month
St. Louis, Missouri
Another tech incubator that’s welcoming millennials with open arms, St. Louis is one of those metros that’s small enough to be affordable and big enough to be interesting. The area is still in the throes of a revitalization, so millennials may have an opportunity to inform and participate in the metro’s renaissance.
Annual family income (24- to 36-year-olds): $43,200
Annual savings: $5,400
Median home value, entry level: $119,900
20-percent down payment: $23,980
Years to save: 4 years, 5 months
No surprise here. Austin is a magnet for millennials. Employment opportunities draw them here, with the cool vibe, nightlife and focus on green living cementing the deal. The housing market here is competitive, so expect a bidding battle once you’re ready to buy.
Annual family income (24- to 36-year-olds): $50,700
Annual savings: $10,864
Median home value, entry level: $249,700
20-percent down payment: $49,940
Years to save: 4 years, 7 months
We get it. At first glance, D.C. may not seem the most affordable place in the country to settle down. But it has a strong job market, a top-notch transit system and a reputation for being one of the most walkable metros in the country.
Annual family income (24- to 36-year-olds): $67,900
Annual savings: $14,550
Median home value, entry level: $343,000
20-percent down payment: $68,600
Years to save: 4 years, 9 months
And Markets in the Country Where Saving Will Take Time
Where in the country will it take you longer to save for a down payment on a home? We crunched those numbers, too. Before you fret, know that there are lots of options out there for first-time buyers, including assistance programs and low-down-payment loans that may ease some home-buying hurdles. Plus, deciding when and where to buy a home is a personal choice, and many first-time buyers choose to live and buy their first homes in these cities.
|Metro Name||Annual Family Income, 2018-Q1 (Est)||Annual Savings, 2018-Q1 (Est)||Median Home Value, Entry Level Single-Family Home (2018-Q1)||20% Down Payment||Years to Save for 20% Down Payment|
|Portland, OR||$42,300||$5,288||$347,200||$69,440||13 years 2 months|
|Denver, CO||$47,100||$5,888||$365,600||$73,120||12 years 5 months|
|San Jose, CA||$94,900||$18,980||$1,133,100||$226,620||11 years 11 months|
|Riverside, CA||$47,600||$5,950||$306,200||$61,240||10 years 4 months|
|Miami-Fort Lauderdale, FL||$41,900||$5,238||$269,500||$53,900||10 years 3 months|
|Los Angeles-Long Beach-Anaheim, CA||$52,700||$11,293||$575,200||$115,040||10 years 2 months|
|San Diego, CA||$52,500||$11,250||$543,400||$108,680||9 years 8 months|
|San Francisco, CA||$83,300||$16,660||$795,800||$159,160||9 years 7 months|
|Las Vegas, NV||$46,100||$5,762||$241,400||$48,280||8 years 5 months|
|Phoenix, AZ||$43,000||$5,375||$224,300||$44,860||8 years 4 months|