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).