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Downpayment Hardships

Saving for a 20 percent down payment on a home took 5.5 years two decades ago. Since then, home values have increased at twice the pace as incomes. Today, for a person earning a median income and saving 10 percent each month, it would take a little more than seven years to save for a down payment, according to a study by Zillow.

This, despite home value appreciation slowing in recent months. According to a recent Zillow Housing Aspirations Report, saving for a down payment was one of the biggest barriers to owning a home, the study said, and as home values continued to outpace income, saving for a down payment was becoming increasingly harder.

The report indicated that the length of time it took to come up with a down payment strictly from saving was probably a factor in why 43 percent of the typical down payment came from saving over time, with buyers relying on other sources such as the sale of a previous home or a gift from family or friends for the rest.

"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," said Skylar Olsen, Director of Economic Research at Zillow. "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 home buyers are looking to family and friends for financial help when coming up with their down payment."

For homebuyers looking to buy a home sooner, Pittsburgh would be an ideal location as it took only 4.8 years to save for a 20 percent down payment, the study found. On the other hand, it would take a homebuyer 22 years of saving for a 20 percent down payment on a median home worth $1.2 million in a market like San Jose, California.

Other cities where it took longer than the average seven years to save for a down payment included Los Angeles (18.4 years), San Francisco (18.3 years), San Diego (15.4 years), Seattle (11.7 years), and New York (11.4 years).

About Author: Radhika Ojha

Radhika Ojha is an independent writer and editor. A former Online Editor and currently a reporter for MReport, she is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Houston, Texas.

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