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Down Payment Main Obstacle for Renters Buying a House

Published: 2017-04-12 - Updated: 2018-01-02
Author: Zillow - Contact:
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Synopsis: Almost 70 percent of renters in 20 U.S. metros say coming up with the down payment is holding them back from homeownership.

A 20-percent down payment on a typical U.S. home costs more than two-thirds of the national median annual household income. In pricier markets, it can cost more than 180 percent of the average annual income.

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A 20-percent down payment on a typical U.S. home costs more than two-thirds of the national median annual household income. In pricier markets, it can cost more than 180 percent of the average annual income.


Even though a mortgage payment is more affordable than a rent payment on a monthly basis (i), renters say they can't buy a home due to the pricey down payment, according to the first Zillow® Housing Aspirations Report™ (ZHAR) (ii).

Almost 70 percent of renters surveyed cite the down payment as a greater barrier to homeownership than debt, job security and qualifying for a mortgage (iii). Just over half of renters cite qualifying for a mortgage as a barrier to homeownership, and half say debt is holding them back. Almost 40 percent of renters say job security is keeping them from buying a home.

The U.S. homeownership rate is near an all-time low and has been falling since 2004, although members of the largest generation of Americans - millennials - are coming of age and starting to think about buying a home and settling down. Rents are also at record highs, costing almost 50 percent of the median income in some cities. Making a monthly mortgage payment is cheaper than a monthly rent payment in all but two of the 35 largest U.S. metros (iv), but first renters need to save enough money for a down payment.

The Zillow Housing Aspirations Report, a semi-annual survey sponsored by Zillow and conducted by IPSOS, asks 10,000 renters and homeowners in 20 metros across the country about their views on homeownership and their personal housing expectations going forward.

Highlights from the Report

With home values across the country at their highest point since June 2007, cobbling together a 20-percent down payment on a home costs more than two-thirds of the U.S. median household annual income (v). In pricier markets like San Jose and Los Angeles, buyers must come up with more than 180 percent of the median annual income, making a home purchase out of reach for many aspiring homeowners.

"With home values close to record highs, it's no surprise renters are concerned about coming up with enough money to buy a home," said Zillow Chief Economist Dr. Svenja Gudell. "Rising rents are also a factor - it's extremely difficult to save when you're paying record-high rents. While it is possible to put down as little as 3 percent on a home, the trade-off is a higher interest rate and costly private mortgage insurance, a financial tradeoff that may make sense for some buyers. But with interest rates rising in 2017, it's important to remember that a lower interest rate can save buyers thousands of dollars over the life of their loan. For those trying to save for a down payment, it's important to set realistic goals and realize it may take a few years. Also, consider working with a reputable financial advisor to help set a budget that works for you."

San Jose, San Diego and Los Angeles had the greatest share of renters say affording the down payment is the number one barrier to owning, at over 72 percent. Women (72 percent) were more likely than men (62 percent) to select the down payment as the top barrier to homeownership.

One-third of buyers used more than one source of funds for their down payment, including gifts and loans from family, according to the Zillow Group Report on Consumer Housing Trends (vi). Over half of buyers saved by setting aside a little money at a time.

Mortgage rates on Zillow ended the month of March at 3.94 percent, down from a high of 4.13 percent in the middle of the month (vii). Home shoppers can use the Zillow Affordability Calculator to see how varying loan amounts and down payments will impact monthly payments and the lifetime balance of their mortgage.

Perceived Barriers to Homeownership in the U.S., Among Renters
Barrier Percent of Renters Citing Barrier
Affording the Down Payment 67.9%
Qualifying for a Mortgage 53.2%
Debt 50.0%
Job Security 38.5%
Not in a Position to Settle Down 20.1%
Not Enough Homes for Sale 11.2%
None 6.9%
Other 4.1%

Top Three Perceived Barriers to Homeownership Among Renters
Metropolitan Area Number 1 Barrier Number 2 Barrier Number 3 Barrier
United States Affording Down Payment - 67.9% Qualifying for Mortgage - 53.2% Debt - 50.0%
New York/Northern New Jersey Affording Down Payment - 56.2% Qualifying for Mortgage - 48.9% Debt - 47.7%
Los Angeles-Long Beach-Anaheim, CA Affording Down Payment - 72.2% Qualifying for Mortgage - 55.0% Debt - 43.7%
Chicago, IL Affording Down Payment - 69.7% Qualifying for Mortgage - 52.5% Debt - 50.6%
Dallas-Fort Worth, TX Affording Down Payment - 65.6% Qualifying for Mortgage - 54.9% Debt - 52.5%
Philadelphia, PA Affording Down Payment - 67.5% Debt - 54.6% Qualifying for Mortgage - 49.3%
Washington, DC Affording Down Payment - 70.6% Qualifying for Mortgage - 58.0% Debt - 53.0%
Miami-Fort Lauderdale, FL Affording Down Payment - 64.7% Qualifying for Mortgage - 54.6% Debt - 45.4%
Atlanta, GA Affording Down Payment - 62.3% Debt - 54.9% Qualifying for Mortgage - 51.3%
Boston, MA Affording Down Payment - 71.5% Qualifying for Mortgage - 53.7% Debt - 43.5%
San Francisco, CA Affording Down Payment - 69.0% Qualifying for Mortgage - 55.5% Debt - 49.8%
Detroit, MI Affording Down Payment - 67.6% Debt - 52.7% Qualifying for Mortgage - 49.9%
Phoenix, AZ Affording Down Payment - 69.2% Qualifying for Mortgage - 59.9% Debt - 51.9%
Seattle, WA Affording Down Payment - 66.0% Qualifying for Mortgage - 52.8% Debt - 48.1%
Minneapolis-St Paul, MN Affording Down Payment - 69.4% Debt - 53.0% Qualifying for Mortgage - 50.1%
San Diego, CA Affording Down Payment - 72.9% Debt - 54.4% Qualifying for Mortgage - 50.7%
St. Louis, MO Affording Down Payment - 70.4% Debt - 53.5% Qualifying for Mortgage - 53.2%
Tampa, FL Affording Down Payment - 70.3% Qualifying for Mortgage - 56.6% Debt - 51.8%
Denver, CO Affording Down Payment - 65.7% Qualifying for Mortgage - 52.4% Debt - 51.4%
Las Vegas, NV Affording Down Payment - 63.0% Qualifying for Mortgage - 54.8% Debt - 48.8%
San Jose, CA Affording Down Payment - 73.9% Qualifying for Mortgage - 48.4% Debt - 43.7%

(i) In the U.S., the monthly median mortgage payment takes 15.8 percent of the median monthly income while the monthly median rent payment takes 29.2 percent of the median monthly income.

(ii) The Zillow Housing Aspirations Report is computed from an IPSOS poll which combines sample of 10,000 U.S. adults from 20 U.S. core-based statistical area (CBSA) metropolitans (Atlanta, Boston, Chicago, Dallas, Denver, Detroit, Los Angeles, Las Vegas, Miami, Minneapolis, New York, Philadelphia, Phoenix, St. Louis, San Diego, San Francisco, San Jose, Seattle, Tampa, and Washington, D.C.) age 18+, surveyed online in English. The survey has a credibility interval of plus or minus 1.1 percentage points for all respondents from the 20 U.S. metropolitans and approximately 5.0 percentage points for an individual U.S. metropolitan. Post-hoc weights were made to the population characteristics on gender, age, region, and race and ethnicity. This version of the survey was conducted March 1st - 15th, 2017. For more information about conducting research intended for public release or Ipsos' online polling methodology, please visit the Public Opinion Polling and Communication page.

(iii) Renters surveyed said coming up with a down payment is a greater barrier than qualifying for a mortgage, debt, job security, not being in a position to settle down and low inventory of homes.

(iv) San Jose and Miami are the only metros among the largest 35 U.S. metros where a mortgage payment takes up more income than a rental payment.

(v) Zillow release on down payment costs here.

(vi) The first annual Zillow Group Report is the largest-ever survey of U.S. home buyers, sellers, owners and renters, and asked more than 13,000 U.S. residents aged 18 to 75 about their homes - how they search for them, pay for them, maintain and improve them, and what frustrations and aspirations color their decisions.

(vii) Rates for a 30-year fixed mortgage. High of 4.13 percent was hit on March 14, 2017.

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