That’s how much extra money renters eager to buy their first house must save every month just to keep up with the expected increase in home values over the next year, according to a new analysis by real estate firm Zillow.
Renters making the median U.S. income for renters—$3,855 per month—and saving the median amount of 2.4%, or $92 a month, would need 26.8 years to be able to make a 20% down payment on a median starter home valued at $148,527, Zillow said in a report Thursday. But that’s just at today’s prices—if home prices increase the 14.9% Zillow expects over the next year, renters would have to increase their savings fivefold, setting aside that extra $369 a month just to keep up, analyst Nicole Bachaud estimated in the report.
There are several ways to make moving into a house a more realistic possibility: Many first-time homebuyers rely on gifts from friends and family or tap into their investment accounts to make the daunting down payment, Zillow said. Other options include saving more aggressively, or taking a mortgage with a much smaller down payment, as little as 3% for some loans. (It would only take 11.5 months for renters to save for a 3% down payment if they set aside 10% of their income a month, Bachaud calculated.)
Today’s relatively low interest rates help make paying a mortgage with less than 20% down more affordable than in the past.