SAN FRANCISCO (CBS SF) – In another daunting sign for prospective Bay Area home buyers, the time for an average renter to save a down payment on a starter home has grown, according to Zillow.
Despite having an income nearly twice the national average, the real estate website found an average renter household in the San Francisco market saving 10% of its income would take 17.4 years to save for a 20% down payment on a typical “starter” home, about eight months longer than five years ago.
The typical starter home, defined as a median home in the bottom third of home prices, is worth $846,415.
Meanwhile in San Jose, where such a home is worth $940,490, the time to save for 20% down has grown to 16.6 years, about 1.1 years longer than it would have taken five years ago.
“In a housing market where prices are rising at record rates, especially when compared to renter incomes, the ever-increasing sum of a 20% down payment can feel out of reach,” Nicole Bachaud, a Zillow economic data analyst, said in a statement.
Nationally, an average renter household saving 10% would need about six years to save for the down payment on a typical starter home, about a year longer than in 2016.
With home prices continuing to rise in much of the country, Zillow said prospective buyers will need to factor that into their saving plans. The company projects 14.9% appreciation over the next year, meaning the average renter would need to save an additional $369 per month to keep up.
With mortgage rates low, the company said it is possible to secure a mortgage while putting less than 20% down, with some lenders allowing as little as 3-5%.
“That lower upfront payment comes with higher monthly payments, but the opportunity to build equity can outweigh those extra costs for many,” Bachaud said.
Among the top 50 real estate markets, Zillow found renters in Los Angeles and San Diego have the longest time to save 20% for a starter home (17.6 and 17.9 years, respectively), while renters in Birmingham, Alabama and Memphis, Tennessee have the shortest (both at 4.7 years).