The homeownership rate in the United States is near a five-decade low. For most Americans, the largest obstacle to achieving the American Dream of homeownership—particularly for first-time buyers—is still saving for a down payment.
Just how much does a potential homebuyer need to have saved to make that down payment? According to an analysis of America’s 15 largest urban areas by realtor.com [1], it has become the “Everest-size mountain they need to climb to reach their dreams of homeownership.”
To calculate the down payment needed to buy a home in the country’s 15 largest metros, realtor.com used the median home listing price and the average percentage that buyers in those respective areas put down on a home. The down payment needed was then broken down over five- and 10-year timelines borrowers needed to reach their goal. For some perspective, realtor.com then calculated how many Starbucks lattes (at $4.45 each) a potential homebuyer would need to forego per day in order to save for that down payment. These numbers assume no home price appreciation for the next 10 years and no down payment assistance programs.
The analysis revealed that in New York City, where the median home price is about $413,900 and the average down payment is about 17.2 percent ($71,191 on a median priced home), a potential homebuyer would need to save $38.99 per day for five years (nine lattes) or $19.49 per day for 10 years (four lattes).
By comparison, on the opposite coast in Los Angeles, a homebuyer would almost need a movie star’s salary to buy a median priced home. The median price of a home in Los Angeles was found to be $678,000, and with an average down payment of 18.3 percent, the buyer would need $124,074 just to get in the house. That computes to $67.95 per day, or 15 lattes, for five years—or $33.97 per day (8 lattes) for 10 years.
In Dallas, where home prices appreciated by 9.3 percent year-over-year in May (topping the average national rate for the month of 5.9 percent), the median home price was $333,400, and the average down payment was 13.6 percent, or $45,432. That number computed to $24.83 per day for five years (six lattes) or $12.42 per day for 10 years (three lattes).
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