MIAMI – July 13, 2018 – Renters in expensive California markets can expect to spend more than two decades saving for a 20 percent downpayment on a median valued home, but Florida buyers can do so in about one-third the time.

Nationwide, renters can expect to spend nearly six and a half years saving for a 20 percent down payment on a home, according to a new HotPads analysis. The median home value in the U.S. is $216,000, which means a 20 percent downpayment would be $43,200. If a renter making the median income saves 20 percent of their income each month – as financial experts recommend – they would have enough for a downpayment in 77 months, which is nearly six and a half years.

However, in the three Florida cities included in the study – Miami, Orlando and Tampa – renters must spend more than 6.5 years. It takes longest in Miami (11 years, 5 months) compared to Tampa (6 years, 11 months) and Orlando (8 years, 2 months).

The study looked at the median amount a city’s residents spend on rent, the median value of homes, and the share of income residents spend each month on housing. In calculating a time for downpayment savings, they assumed that households can save 20 percent of their monthly income.

Florida cities

Miami: Residents currently spend 50.1 percent of their income on housing and have a median annual income of $47,398. With a median rent of $2,000 per month and $271,000 median home value, it would take Miami residents 11 years and 5 months to save 20 percent ($47,938) toward a home. However, it would only take them 2 years to save enough for a 3.5 percent downpayment, which is offered by FHA and some private banks.

Orlando: Residents spend 39.2% of their monthly income on housing and have a median annual income of $45,431. With a median rent of $1,485 and median home value of $225,000, it would talk Orlando residents 8 years and 2 months to save for a 20 percent ($45,431) downpayment.  However, a 3.5 percent downpayment takes only 1 year and 6 months.

Tampa: Residents spend 36.8 percent of their monthly income on housing and have a median annual income of $47,140. With a median rent of $1,445 and median home value of $203,700, it would take Tampa residents 6 years and 11 months to save a 20 percent ($47,140) downpayment. However a 3.5 percent downpayment would take only 1 year and 3 months.

Nationally, the median rent is $1,480 per month, up 2.5 percent from a year ago. Experts recommend spending no more than 30 percent of income on housing expenses, but the typical U.S. renter spends 34 percent of their income on housing.

In the country’s most expensive housing markets like San Jose, Los Angeles and San Diego, it could take renters 22 years to save up a 20 percent downpayment on the median home, assuming they can afford to set aside 20 percent of their income each month – and renters in these markets spend more than 55 percent of their income on rent.

Meanwhile, it will take a typical renter in Pittsburgh, Cleveland, Detroit and Indianapolis less than four and a half years to save a 20 percent downpayment. Renters in these markets spend 30 percent or less of their income on housing, making it easier for them to save.

“Home prices are outpacing incomes in many of the country’s largest markets, which makes saving for a home more difficult,” says Joshua Clark, economist at HotPads. “On top of that, the current generation of first-time buyers is dealing with unprecedented levels of student debt, making the downpayment a major factor keeping young renters out of the housing market even though many young people say they have ambitions to buy. While some high earners may manage to save more than the recommended 20 percent of their income or may have the good fortune of windfalls such as family assistance, inheritance or large bonuses, most young adults struggle to save. Sustained increases in home values and rents suggest that lower downpayments may become more popular as first-time buyers continue to be pinched on both sides of the market.”

In 2017, about 29 percent of first-time buyers put down between 3 and 9 percent on their home purchase.

© 2018 Florida Realtors®
Reprinted with permission. Florida Realtors®. All rights reserved.