Austin residents hoping to buy their first home can breathe a little sigh of relief. A new analysis shows Austin is the ninth best major metro area in the U.S. for putting aside money toward a down payment.
The analysis, produced by Zillow Group-owned RealEstate.com, indicates it takes Austinites an average of four years and seven months to save money for a 20 percent down payment.
“Austin is a magnet for millennials,” RealEstate.com says. “Employment opportunities draw them here, with the cool vibe, nightlife, and focus on green living cementing the deal. The housing market here is competitive, so expect a bidding battle once you’re ready to buy.”
Dallas-Fort Worth, at No. 2, was the only other Texas metro area to make the list. It takes an average of three years and five months for a first-time homebuyer in DFW to stash enough cash for a 20 percent down payment. Only Chicago had a shorter saving period for a 20 percent down payment.
By comparison, Portland, Oregon, is the worst place to save for a down payment: The average time there is 13 years, two months, according to RealEstate.com. Denver is second worst, at 12 years, five months.
While DFW boasts a hot job market and sizzling population growth, “the region has somewhat slipped under millennials’ radars — so much so that the Dallas Regional Chamber recently launched a ‘Say Yes to Dallas’ recruitment initiative. Maybe it’s time to give Dallas a second look,” RealEstate.com says.
Here’s the lowdown on how RealEstate.com arrived at the down payment numbers. The analysis factored in the median household income among millennials (ages 24 to 36) in the 35 largest U.S. metro areas, along with their estimated annual household savings, to figure out how long it would take to save for a 20 percent down payment on a starter home (priced within the bottom third of the market).
Twenty percent is the sweet spot for down payments, as a buyer with a down payment of less than that amount typically must buy private mortgage insurance. That adds to the cost of the monthly mortgage payment.
For Austin, the median annual income for millennial households is $50,700 with $10,864 in annual savings. For a starter home with a median value of $249,700, that would result in a 20 percent down payment of $49,940.
The RealEstate.com study might give solace to Austin millennials who covet a home. According to Zillow Group’s most recent housing trends report, 39 percent of millennial homebuyers find it difficult to save money for a down payment.
“Contrary to popular belief, millennials want to buy homes, but high home prices, low inventory, and stagnant wage growth are some of the many factors that may be driving would-be buyers into delaying homeownership,” Justin LaJoie, general manager of RealEstate.com, says in a release.