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The Ever-Present Down Payment Dilemma

Buyers saving up to buy a home had better be patient. No matter what the city or what the age group, saving for a new home will take years‒‒in some cases, decades.

This is especially true in California, according to a new report by Magnify Money. The five hardest places for everyone to save up for a home are in the Golden State, as are nine of the 10 hardest places for the young to buy. California, the report stated, “is where homeownership dreams go to die.”

Overall, the report found that homeownership is out of reach for 20 percent of Americans. Even those within reach need years to save up. According to Magnify Money, 45 to 65 year-olds need an average of 4.69 years to save up; 25 to 44 year-olds need an average of 5.63 years; and 15 to 24 year-olds need an average of 27.2 years.

“In 79 out of 380 areas analyzed, workers of all age groups wouldn’t be able to qualify for a mortgage loan large enough to cover the cost of a median-priced home,” Magnify Money said.

The easiest place to save up for a home for 25 to 44 year olds is Johnstown, Pennsylvania. There, the report found, A median-priced home costs $74,900 and the median salary is $53,164. Assuming the standard 20 percent down payment, “this buyer would have to save at least $14,980,” the report stated. “On top of that, he would pay another $3,370 in closing costs (assuming an estimate of 4.5 percent) and set aside $1,370 in an emergency cash reserve. In total, he’d need to save $19,720,” and assuming the buyer could set aside a third of his earnings for the down payment, “it would take him 1.85 years.”

Even qualifying for mortgages can be tough, the report found. Twenty-one percent of borrowers in all markets and age groups wouldn’t qualify for mortgages; and 94 percent of those under 25 would not qualify anywhere.

Salinas, California, is the most out of reach for the 25 to 44 year old demographic. The city’s median salary of nearly $55,000 is paltry compared to the median home price of $750,000. Here, it would take the median buyer almost 47 years to save up for just the down payment. Nine of the top 10 toughest markets to buy for 25 to 44 year olds were located in California (Salinas, Santa Maria, Los Angeles, Santa Cruz, San Francisco, San Jose, Napa, San Luis Obispo, and Santa Rosa). The only non-California market in the top 10 least affordable list was Kahului-Wailaku-Lahaina, Hawaii, which ranked sixth. The time needed to save for a home in the top 10 most expensive metro areas for this age group is 29 years, according to the report.

Other markets on the top 10 list of easiest places to buy for the 25 to 44 year old age group after Johnstown were Danville, Illinois; Bay City, Michigan; Racine, Wisconsin; Terre Haute, Indiana; Weirton-Steubenville, West Virginia-Ohio; Manfield, Ohio; Saginaw, Michigan; Decatur, Illinois; and Muncie, Indiana. In fact, “nine out of the 10 most affordable metro areas are in the Midwest, where housing prices are significantly lower compared to other regions,” the report stated. “On average, it would take just 2.28 years for a 25 to 44 year-old to save for a home in the 10 most affordable metros.”

For 45 to 65 year olds, Danville, Illinois, was the most affordable market while Salinas, California, remained the most expensive market to afford a down payment for a home. In fact, the results for this age group largely paralleled those of the 25 to 44 year old age group; Midwest markets were found to be most affordable while California markets ere found to be most expensive.

Click here to view the complete study.

About Author: ScottMorgan1

Scott Morgan is a multi-award-winning journalist and editor based out of Texas. During his 11 years as a newspaper journalist, he wrote more than 4,000 published pieces. He's been recognized for his work since 2001, and his creative writing continues to win acclaim from readers and fellow writers alike. He is also a creative writing teacher and the author of several books, from short fiction to written works about writing.
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