It Now Takes More Than 50 Years to Save for a Down Payment in These Cities

If you're starting from scratch, saving for a down payment on your first home could take half your life, depending on where you're buying.

In two major U.S. metro areas, the typical first-time homebuyer would need to save for at least 50 years, according to a new report by real estate lender Rocket Mortgage. Those cities are New York and San Francisco, where it requires an estimated 65 years and 57 years of saving to afford the standard down payment, respectively.

“Saving for a down payment takes years of discipline, which is why receiving the keys is such a meaningful milestone,” Bill Banfield, Rocket’s chief business officer, said in the report.

“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.”

In 13 cities, first-time buyers would need to save for at least 20 years, the analysis found. But in several popular metros in the South and Midwest — including Detroit and Fort Worth, Texas — buyers could reach a down payment in five years or less.

Rocket’s analysis looked at nearly 50 major metros across the U.S. It calculated the required years of savings based on local home prices and down payment trends for first-time buyers and assumed they were saving 5% of their annual income.

Saving for a down payment, by city

Down payments are consistently a major barrier for homebuyers, according to the Harvard University Joint Center for Housing Studies. For first-time buyers, down payments can be a downright nightmare. That’s because these buyers are typically younger, have less money saved and can't tap equity from the sale of an existing home to help fund the purchase.

The prospect of saving for decades to afford a down payment can be demoralizing. But there are ways to sidestep that roadblock. And they largely boil down to location.

Nationally, the median down payment is now $64,000, according to Redfin. As a percentage, that translates to 15% of the median sale price. But that picture can vary drastically from city to city.

In Rocket’s analysis, the time it takes to save for a down payment is not just a reflection of home prices of the area. The estimate also accounts for local incomes and the typical down payment percentage in each market.

In New York, for instance, not only are home prices high, but the typical down payment is a whopping 30%. Rocket noted that the percentage is so high because condo associations in the city tend to have strict rules that require between 20% and 30% down payments.

Large down payments can also be a reflection of the competitiveness of the housing market. Increasingly, first-time buyers have to compete with all-cash buyers, which can result in higher down payments across the board.

A massive down payment isn't always necessary, however. In fact, single-digit-percentage down payments are customary in about two dozen major cities, including Miami, Atlanta and Pittsburgh.

Down payment assistance programs are another key method to help first-time buyers afford a home. The Urban Institute identified more than 1,600 such programs across the country. Some programs provide publicly funded grant money with no strings attached, while others extend interest-free loans that are essentially second mortgages.

One notable option available nationwide is through the Neighborhood Assistance Corporation of America, a nonprofit housing group that runs a homebuying program boasting zero down payment and a discounted mortgage rate.