Condo homes near Seattle, Washington.
A new report revealed that the average resident in the Seattle metro area needs slightly more than 12 years to save for a good down payment on a typical starter home, which is roughly two years longer than they would have needed to save compared to just five years ago.
The report — written and published by Zillow on Thursday — said that the average Seattle renter would need to save 10% of their income for 12 years and two months to afford a 20% down payment on a starter home. That projection is two years and four months longer than it would have been if the average renter planned to start saving in 2016, the report said.
Disproportionate growth between home prices and renter income is responsible for the longer save times, the report said. Currently, starter home prices are growing seven times faster than renter incomes, it said.
“Without the equity from a previous home sale, first-time home buyers face more challenges in coming up with a down payment,” Nicole Bachaud, a Zillow analyst, wrote in news release about the report. “In a housing market where prices are rising at record rates, especially when compared to renter incomes, the ever-increasing sum of a 20% down payment can feel out of reach.”
To make matters worse, home prices are only expected to go up. Zillow predicts that the average American renter will need to save roughly $364 more a month to keep up with the forecasted 14.9% increase in appreciation. Right now, the average price of a starter home in the Seattle metro area is $440,927, according to the report.
There is some good news, however.
Typically, the more you spend on your down payment, the lower your monthly rates will be. But mortgage rates are down across the board, meaning buyers can take advantage of those lower rates without spending a ton of money on a down payment. Most lenders will let you put down as little as 3% to 5%.
“That lower upfront payment comes with higher monthly payments, but the opportunity to build equity can outweigh those extra costs for many,” Bachaud said.