Spending

Here's how long it would take to save up to buy a home in San Francisco and other California cities

The typical down payment on a home in San Francisco is $218,229, but 88% of would-be homebuyers have less than $10,000 stashed away.

Twenty/20

A down payment alone could cost you $218,229 if you wanted to buy a home in San Francisco. By comparison, the typical home in America costs $256,663.

Big cities across the United States tout similarly high real-estate prices. Yet over half of millennials who want to buy a house in the next year have less than $10,000 stashed away. Younger people who are drawn to cities and want to be homeowners might need to save for years — over a decade, in some cases. 

Many of them don't realize that, though. Researchers at real-estate website Point2 polled 7,000 prospective homebuyers nationwide and found that 74% of millennials in the market for a home want to ink a deal in the next 12 months.

But pricey down payments and lack of savings are squeezing many millennials out. Nearly 9 in 10 of those surveyed between the ages of 25 and 40 reported having "significantly less" in savings than the average national down payment amount of $62,600. Another 14% said they had no savings at all.

And in the country overall, Americans ages 35 to 44 typically have just $3,693 saved, while those under 35 have $2,739.

To find how long it would take millennials to save as much as they would need to buy, Point2 used data from the U.S. Census Bureau to find the average household income and median home price in the country's 100 most populous cities and calculated a 20% down payment based on those home prices.

In San Francisco, where the average annual income is $148,699, consumers saving the recommended 20% of their monthly pay could have enough for a down payment in about 7.3 years. Those saving the 2019 average of 8% of their income, however, won't be able to buy for just over 18 years.

4 of 5 of the cities with the highest down payments are in California

It may not come as a surprise that real estate in California is expensive: The state is home to four of the top five cities with the highest down payments. The median home value there exceeds $1 million.

Here's how long it takes to save.

San Francisco, California

Average household income: $148,699
Median home price: $1,091,146          
20% down payment: $218,229          
Years needed to save (20% of income): 7.3 
Years needed to save (8% from income): 18.3

Fremont, California

Average household income: $148,804                       
Median home price: $933,662
20% down payment: $186,732          
Years needed to save (20% of income): 6.3 
Years needed to save (8% from income): 15.7 

Irvine, California

Average household income: $109,305           
Median home price: $861,567             
20% down payment: $172,313          
Years needed to save (20% of income): 7.9 
Years needed to save (8% from income): 19.7

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How to make your home-buying dream a reality

Video by Jason Armesto

San Jose comes in at No. 4 with average down payments around $171,449, meaning it would take 14.8 years for typical savers to reach that. 

New York, Seattle, and Arlington, Virginia, can also be found on the list. In fact, most of the largest U.S. markets require down payments between $10,000 and $50,000.

On the opposite end of the spectrum in Detroit, it would take millennials just a year and eight months to save up enough for the average $9,879 down payment.

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Ryan Serhant: Why now is a great time to invest in real estate

Houses are selling fast due to record-low mortgage rates and high pandemic-driven demand. U.S. home sales hit their highest level in almost 14 years in August.

And while some Americans are flocking to the suburbs in search of more space while they work from home, cities remain popular: Other buyers are snapping up apartments in New York City, especially Brooklyn, which has seen a near-record surge.

Real estate rules to remember

When you put a spotlight on income, it makes a bit more sense why Californians pay so much for housing. The median income in San Francisco, for example, is among the highest in the country, which can make it slightly easier for younger people to buy property.

Plus, millennials are starting to save more: In April this year, the average savings rate shot up to 33.7%, according to Point2. And in a new report from Bank of America, a quarter of the 800 millennials polled said they have $100,000 or more in savings. (That total figure includes savings in 401(k) funds, though, and money invested in individual retirement accounts, and the average savings rate dropped to 17.8% by July.)

If you're considering buying a home, make sure you look at the full picture. Experts suggest renting in a neighborhood before you commit to buying so you can get a sense of the area and whether you can see yourself there long term.

And look at your budget, too. Median home values are expected to rise in the U.S., Zillow finds. The national median has jumped 5.1% in the past year and could climb another 4.8% within the next year.

The good news is many cities offer down payment assistance programs for those who need a boost. You might also find that you don't need a 20% down payment, or even 10% for that matter. Data provided to Grow by Attom Data Solutions shows homebuyers put down a median of just 7.6%. Some mortgages can go for as little as 3% down or require no down payment at all.

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