Americans hoping to buy their first home may need to save for roughly 65 years to afford a place in New York City, but there are a couple of spots in the Midwest where it takes only about four years.
It could take decades for a typical household living in the Big Apple to afford the median first-time buyer down payment of $265,000, according to an analysis released Tuesday by major retail mortgage lender Rocket Mortgage.
The analysis assumes that the household is saving five percent of its median annual income. In New York City, the median household income is $81,228, according to the analysis.
“The time it takes to save up a down payment varies enormously by market,” Chen Zhao, Redfin Head of Economic Research, said in a statement released with Rocket Mortgage’s findings.
“Local home prices are driven by local incomes. In more affordable markets, buyers can accumulate a down payment much faster because home prices—and therefore down payment requirements—are significantly lower,” Zhao explained.
If you don’t mind braving colder weather in the winter, Michigan has some of the most affordable down payments for first-time homebuyers.
It would only take about three years for a typical household to save for a down payment in Warren, Michigan, according to Rocket Mortgage’s analysis.
Warren, located about 15 miles north of Detroit, is the third-largest city in the state. The median first-time buyer down payment in Warren is $8,797, and the median annual household income is $56,281.
If you prefer a busier city, a typical household needs a little less than four years to save for a median first-time buyer down payment of $7,600 in Detroit, analysts concluded. The median annual household income in Detroit is just $39,209.
Those who don’t want to leave the East Coast but want a more affordable option than New York City can look at Virginia Beach, Virginia.
It takes a household that makes a median annual income of $94,579 a little over four years to afford a first-time home in Virginia Beach. The median first-time buyer down payment in the beach destination is $20,450.
“For anyone hoping to own a home someday, it’s never too early to understand what buyers are putting down in your market and start building a plan,” Bill Banfield, Rocket’s Chief Business Officer, said in a statement.
“In many markets, the idea that you need 20% down is simply a myth. Our analysis found that down payments as low as 5% to 6% are common for conventional loans in some affordable markets,” Banfield said.
While a typical household in New York City needs to save 30 percent of the home purchase price for the down payment, first-time buyers in Warren and Detroit need only 5 percent, and those in Virginia Beach need 6.3 percent, according to the analysis.
Rocket Mortgage’s down payment data came out as new home sales plunged.
Sales of new single-family houses dropped 7.3 percent in May from April, according to a monthly market report from the Department of Housing and Urban Development.
May also saw the annual rate of inflation rise past four percent, the biggest increase in three years.
Americans continue to struggle to pay for everyday necessities, including gas and groceries, let alone make a life-changing purchase like buying their first home.
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