Home Buyers in These Cities Could Save These Down Payments—by Moving In With Their Parents
When COVID-19 shuttered offices across the U.S.—forcing legions of white-collar workers to go remote—many took a hard look at their living situations. Why were they spending so much money to spend 24 hours a day in their itty, bitty, high-priced apartments? As a result, some young professionals decided to trade in their pricey apartments to move back in with good ol’ Mom and Dad and accelerate their savings.
While the prospect of moving back in with the ‘rents may be shudder-inducing to many, for others it’s a dream of home-cooked meals and freshly folded laundry. Plus, folks who have retained their jobs save some significant money that could help them to eventually become homeowners.
When life gives you lemons, save up for a down payment on a home?
“The pandemic changed how we think about being a young adult and moving back in with your family. It’s not just a failure to launch. So many people are now choosing to do it,” says realtor.com® Chief Economist Danielle Hale. “They might be able to move into homeownership sooner than they would—or they may be able to put down a bigger down payment.”
Putting what they would have paid in rent toward a down payment could allow aspiring homeowners to have a 5% down payment on a median-priced home in under two years. Five percent was the median down payment that buyers contributed to their home purchases nationally in December. (This assumes folks were paying the national median rent of $1,533 for a one-bedroom apartment.) In some metropolitan areas, like Chicago, St. Louis, and Philadelphia, former renters could even do it in just under a year.
Just because a metro is less expensive, it doesn’t mean folks can save up faster. Wages are often lower in cheaper areas as are monthly rent and home prices. So it can take longer to hit a goal when folks are putting less money in.
“This scenario could work better in some markets than others,” admits Hale.
To come up with our findings, the realtor.com economics team pored over our for-sale home listings and rental data in the nation’s 20 largest metropolitan areas in December. Metros include the main city and surrounding towns, suburbs, and smaller urban areas.
So how long will it take renters to save up for a 5% down payment in these large metros if they move back in with their families? That depends on where they live.
It will take the least amount of time, just 11 months, to come up with a 5% down payment in the Chicago, Philadelphia, and St. Louis metropolitan areas.
In Chicago and Philadelphia, the median monthly rents hover around $1,500 a month, while home prices are a median $327,000. That means buyers need a 5% down payment of $16,350.
“This is an affordable market for sure,” says real estate broker Ryan Gable, of Starting Point Realty in Chicago. He specializes in working with first-time buyers. “But there’s not a lot for sale unless you’re looking for a high-rise downtown.”
St. Louis has lower median rents, of about $1,035 a month, and home prices, of $232,000. Buyers there need only an $11,600 down payment, which will take about 11 months to save up when factoring in those lower rents. But they still should have a little extra stashed away for emergencies.
“We tell people to have a down payment, and then on top of that have a minimum of $10,000 for a single-family home for unexpected expenses on the house, like [problems with] a roof, furnace, air conditioning,” says Gable. “You have to have a cushion for unexpected expenses.”
On the other end of the spectrum is Los Angeles, where ultrahigh prices mean it will take the longest to save up that 5% even if folks are living rent-free. Former renters can expect to spend 22 months accumulating that $2,250 monthly rent into a $49,950 down payment. The median home price in the L.A. metro was a whopping $999,000.
Here’s how long it will take to save up for a 5% down payment:
- Atlanta, GA: 13 months to save $17,500
- Boston, MA: 15 months to save $32,450
- Chicago, IL: 11 months to save $16,350
- Dallas, TX: 16 months to save $17,700
- Denver, CO: 18 months to save $26,650
- Detroit, MI: 13 months to save $12,600
- Houston, TX: 16 months to save $16,500
- Los Angeles, CA: 22 months to save $49,950
- Miami, FL: 12 months to save $20,450
- Minneapolis, MN: 13 months to save $17,200
- New York, NY: 13 months to save $31,350
- Philadelphia, PA: 11 months to save $16,350
- Phoenix, AZ: 17 months to save $20,650
- Riverside, CA: 15 months to save $23,750
- San Diego, CA: 20 months to save $39,850
- San Francisco, CA: 21 months to save $49,750
- Seattle, WA: 19 months to save $31,400
- St. Louis, MO: 11 months to save $11,600
- Tampa, FL: 12 months to save $15,000
- Washington, DC: 14 months to save $24,850