Renters May Take Between Six Years, Three Decades to Save Up a Down Payment

All real estate is local, yet the average American renter buying a median-priced home will need six and a half years to save up the typical 20 percent down payment, according to rental listing company HotPads.

Over the past several years, rents have been rising, hampering renters from saving up a down payment faster. According to CNBC, the typical renter is cost-burdened, spending 34 percent of their income on rent, more than the recommended threshold of 30 percent. Many new and existing lending programs are targeting first-time buyers struggling to save up. Government-insured FHA loans have a minimum down payment of 3.5 percent, and Fannie Mae and Freddie Mac also have fixed-rate mortgage programs requiring 3 percent down. In each of these cases, borrowers are required to have mortgage insurance.

“The current generation of first-time buyers is dealing with unprecedented levels of student debt, making the down payment a major factor keeping young renters out of the housing market even though many young people say they have ambitions to buy,” wrote Joshua Clark, an economist at HotPads. “While some high earners may manage to save more than the recommended 20 percent of their income, or may have the good fortune of windfalls such as family assistance, inheritance, or large bonuses, most young adults struggle to save.” 

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