Time to Save for a Down Pay­ment at High­est Point Since the Hous­ing Bub­ble

National Mortgage News - - Origination - By Paul Cen­topani

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 pay- ment, 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.

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