Time to save for a down payment at highest since housing bubble
With home values nearly doubling income growth in the last 20 years, it's now taking homebuyers 7.2 years to put together a down payment, according to Zillow.
For the typical consumer making the median income and saving 10% each month, it's the longest amount of time to gather a 20% down payment since 2008. Fears of another housing crisis heighten with parallels to a decade ago. It took 5.5 years in 1998, but home values jumped 98.6%, while income grew 52.6% since then.
"The simple fact that home values have far outpaced income growth, lengthening the time needed to save for a down payment, contributes to millennials' struggles to enter homeownership," Skylar Olsen, Zillow's director of economic research and outreach, said in a press release.
"Saving up for a down payment can be tough, especially when the cost of everyday life outpaces the money you put into the bank. It requires good budgeting and long-term planning. It's one reason why more and more first-time homebuyers are looking to family and friends for financial help when coming up with their down payment."
With rents decelerating and a higher percentage of consumers opting for renovations instead of looking for a new home, potential homebuyers could be deterred from entering the market with how long and how much it will take to save for a down payment.
"Slower rent growth in recent months should create some more breathing space in renters' budgets, but rents remain high by historic standards. Even if you don't have plans to buy a home in the next year or two, it's not a bad idea to start setting aside savings for a future home purchase. It's also important to remember that there are many options for mortgages requiring less than 20% down," Olsen said.