Home Buyers Need to Save up to $600 a Month -- Just to Keep Up with Rising Home Prices

Saving for a down payment is a moving target for many first-time buyers, especially in pricey markets like Seattle and San Jose, where home values are expected to rise as much as $36,000 over the next year

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Zillow

Nov 09, 2017, 07:00 ET

SEATTLE, Nov. 9, 2017 /PRNewswire/ -- For future home buyers wondering when to stop saving and get into the housing market, the math is clear: the sooner the better. With home values forecasted to rise in every major U.S. metro over the next year, a 20 percent down payment on the median-priced home today will cost thousands of dollars more just one year from now.

Nationally, the median home will be worth $6,275 more a year from now, according to Zillow^®'s home value forecasts. That means the average U.S. buyer will need to save an additional $105 a month – $1,260 total over the next year – just to account for how much more a 20 percent down payment will cost a year from now.

In hot coastal markets like San Jose, home values are expected to rise as much as $35,934 by this time next year, the highest annual dollar increase of the metros analyzed. A buyer in 2018 will then need $7,188 more for a down payment on the median home than they would today. For those saving on a monthly basis for a future home purchase, that equates to putting away an additional $599 a month just to keep up with home value appreciation, let alone whatever else is needed for the down payment itself. Future home buyers in Seattle, San Diego and Riverside, Calif. can also expect to spend thousands of dollars more on down payments for the median home a year from now.

Saving for a down payment is one of the biggest hurdles to homeownershipⁱ. That may be why more than half (59 percent) of all first-time buyers today put less than 20 percent down on their home purchase, according to Zillow Group's Consumer Housing Trends Report 2017. However, a small down payment does not come without risks. The report also found that buyers with larger down payments are more likely to get their offer accepted, averaging just 1.9 total offers before winning their house compared to 2.4 for buyers with lower down payments. When time is money, a low down payment can be costly.

"Sky-high rents and rising home prices are putting first-time buyers in a bit of a catch-22," says Dr. Svenja Gudell, Zillow chief economist. "Buying now with a low down payment can be riskier, and the offer may not be considered as competitive by the seller. However, a renter who saves for another year to reach a larger down payment may find that the home they love today is outside their budget a year from now. For those considering buying in the next year, getting into the market today may make more financial sense than they think."

Buyers can use the Zillow affordability calculator to see how much they can actually afford to spend on a home, based on their income, debt and savings. The Zillow mortgage calculator can also provide custom down payment estimates based on home price and interest rates.

Metro	Median Home Value (Sept. 2017)	20 Percent Down Payment (Sept. 2017)	YoY Home Value Forecast (%)	YoY Home Value Forecast ($)	Median Home Value (Sept. 2018)	20 Percent Down Payment (Sept. 2018)	Avg. Monthly Savings Needed to Keep up with Home Prices Over Next Year
United States	$ 202,700	$ 40,540	3.1%	$ 6,275	$ 208,975	$ 41,795	$ 105
Los Angeles-Long Beach-Anaheim, CA	$ 613,200	$ 122,640	1.2%	$ 7,495	$ 620,695	$ 124,139	$ 125
Chicago, IL	$ 213,600	$ 42,720	3.3%	$ 6,996	$ 220,596	$ 44,119	$ 117
Dallas-Fort Worth, TX	$ 214,800	$ 42,960	4.6%	$ 9,875	$ 224,675	$ 44,935	$ 165
Philadelphia, PA	$ 218,200	$ 43,640	2.0%	$ 4,455	$ 222,655	$ 44,531	$ 74
Houston, TX	$ 182,200	$ 36,440	2.8%	$ 5,059	$ 187,259	$ 37,452	$ 84
Washington, DC	$ 385,300	$ 77,060	2.4%	$ 9,251	$ 394,551	$ 78,910	$ 154
Miami-Fort Lauderdale, FL	$ 257,900	$ 51,580	1.6%	$ 4,080	$ 261,980	$ 52,396	$ 68
Atlanta, GA	$ 182,700	$ 36,540	5.2%	$ 9,573	$ 192,273	$ 38,455	$ 160
Boston, MA	$ 430,700	$ 86,140	2.9%	$ 12,347	$ 443,047	$ 88,609	$ 206
San Francisco, CA	$ 865,400	$ 173,080	1.3%	$ 11,538	$ 876,938	$ 175,388	$ 192
Detroit, MI	$ 142,400	$ 28,480	3.7%	$ 5,218	$ 147,618	$ 29,524	$ 87
Riverside, CA	$ 333,000	$ 66,600	4.8%	$ 15,949	$ 348,949	$ 69,790	$ 266
Phoenix, AZ	$ 240,500	$ 48,100	2.8%	$ 6,800	$ 247,300	$ 49,460	$ 113
Seattle, WA	$ 455,800	$ 91,160	5.2%	$ 23,651	$ 479,451	$ 95,890	$ 394
Minneapolis-St Paul, MN	$ 247,200	$ 49,440	2.3%	$ 5,742	$ 252,942	$ 50,588	$ 96
San Diego, CA	$ 553,900	$ 110,780	2.9%	$ 16,006	$ 569,906	$ 113,981	$ 267
St. Louis, MO	$ 148,300	$ 29,660	2.2%	$ 3,324	$ 151,624	$ 30,325	$ 55
Tampa, FL	$ 188,300	$ 37,660	3.4%	$ 6,385	$ 194,685	$ 38,937	$ 106
Baltimore, MD	$ 262,000	$ 52,400	2.9%	$ 7,639	$ 269,639	$ 53,928	$ 127
Denver, CO	$ 372,800	$ 74,560	2.9%	$ 10,867	$ 383,667	$ 76,733	$ 181
Pittsburgh, PA	$ 137,800	$ 27,560	2.6%	$ 3,625	$ 141,425	$ 28,285	$ 60
Portland, OR	$ 369,700	$ 73,940	3.7%	$ 13,648	$ 383,348	$ 76,670	$ 227
Charlotte, NC	$ 178,700	$ 35,740	4.2%	$ 7,422	$ 186,122	$ 37,224	$ 124
Sacramento, CA	$ 373,600	$ 74,720	3.9%	$ 14,736	$ 388,336	$ 77,667	$ 246
San Antonio, TX	$ 166,100	$ 33,220	2.7%	$ 4,415	$ 170,515	$ 34,103	$ 74
Orlando, FL	$ 209,600	$ 41,920	4.2%	$ 8,764	$ 218,364	$ 43,673	$ 146
Cincinnati, OH	$ 154,100	$ 30,820	2.7%	$ 4,126	$ 158,226	$ 31,645	$ 69
Cleveland, OH	$ 136,300	$ 27,260	2.5%	$ 3,446	$ 139,746	$ 27,949	$ 57
Kansas City, MO	$ 161,100	$ 32,220	3.0%	$ 4,775	$ 165,875	$ 33,175	$ 80
Las Vegas, NV	$ 233,600	$ 46,720	5.9%	$ 13,731	$ 247,331	$ 49,466	$ 229
Columbus, OH	$ 166,400	$ 33,280	3.4%	$ 5,653	$ 172,053	$ 34,411	$ 94
Indianapolis, IN	$ 138,700	$ 27,740	3.2%	$ 4,486	$ 143,186	$ 28,637	$ 75
San Jose, CA	$ 1,052,500	$210,500	3.4%	$ 35,934	$ 1,088,434	$ 217,687	$ 599
Austin, TX	$ 274,700	$ 54,940	3.3%	$ 9,171	$ 283,871	$ 56,774	$ 153

Zillow

Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow Group's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc.

ⁱ According to the first Zillow Housing Aspirations Report (ZHAR), a semi-annual survey of 10,000 Americans seeking insight into their views on homeownership and their housing plans.

SOURCE Zillow