First-Time Buyers Earn $30,000 More Than Their Peers Who Didn’t Buy a Home

For buyers entering the housing market for the first time, the median household income isn’t enough, according to a new RealEstate.com report.

Buying a home is one of the most expensive transactions most Americans will make in their life, and breaking into the housing market can be especially difficult for first-time buyers. A new RealEstate.com analysis finds that the typical first-time buyer earns more than the median household income, helping them afford to buy a home.

The median income for a first-time buyer is $72,500, compared with the national median household income of $60,700. The difference in income for first-time buyers is more pronounced when compared with their peers who didn’t buy, who have a median income of $42,500, according to the 2018 Zillow® Group Report on Consumer Housing Trends.

Most buyers rely on savings to finance a down payment, but the second-highest source for a down payment comes from the proceeds from a previous home salei. Buyers entering the market for the first time don’t have this resource, though, so a higher income helps them set aside enough for a down payment.

First-time home buyers tend to put down slightly smaller down payments, with a median down payment of 14.5 percent of a home’s price, rather than the traditional 20 percent down payment. By comparison, 58 percent of repeat buyers put down at least 20 percentii. With this smaller down payment, first-time buyers earning the median income could afford to buy a $338,000 home, meaning they could buy about 68 percent of available homesiii.

“Buying a home, especially for the first time, is a major step in a lot of people’s lives,” said Justin LaJoie, RealEstate.com General Manager. “But with home prices climbing ever higher, and inventory yet to see sustained increases, getting a foot in the door is incredibly difficult for new buyers who can’t rely on selling another home to come up with a down payment.”

These are the markets where first-time buyers can afford the largest and smallest shares of listingsiv:

Largest Share of Listings Affordable

Smallest Share of Listings Affordable

Metropolitan Area

Share Affordable

Metropolitan Area

Share Affordable

1. St. Louis, MO 83.7% 1. Los Angeles, CA 25.4%
2. Pittsburgh, PA 81.7% 2. San Jose, CA 28.4%
3. Hartford, CT 81.5% 3. San Diego, CA 30.4%
4. Buffalo, NY 80.7% 4. San Francisco, CA 34.1%
5. Oklahoma City, OK 79.7% 5. Miami, FL 39.7%

Zillow Group designed the RealEstate.com search experience to help first-time buyers trying to understand what they can afford with their monthly housing budget. Home shoppers can search RealEstate.com for homes based on the “All-In Monthly Price,” which lets people search based on their monthly budget and down payment savings amount. It includes mortgage payments, property taxes and utilities.

Metropolitan Area  Median First-
time Buyer
Income
Maximum
Price
Affordable to
Median First-
time Buyer
Share of
Homes
Affordable to
Median First-
time Buyer
United States

$ 72,500

$ 338,100

67.7%

New York/Northern New Jersey

$ 95,800

$ 446,800

41.3%

Los Angeles-Long Beach-Anaheim, CA

$ 90,000

$ 419,600

25.4%

Chicago, IL

$ 87,000

$ 405,800

72.0%

Dallas-Fort Worth, TX

$ 88,600

$ 413,000

66.5%

Philadelphia, PA

$ 88,000

$ 410,300

76.6%

Houston, TX

$ 84,900

$ 396,000

70.1%

Washington, DC

$ 132,500

$ 617,800

72.2%

Miami-Fort Lauderdale, FL

$ 70,700

$ 329,800

39.7%

Atlanta, GA

$ 86,700

$ 404,500

70.7%

Boston, MA

$ 109,900

$ 512,500

52.0%

San Francisco, CA

$ 133,200

$ 621,100

34.1%

Detroit, MI

$ 73,800

$ 344,300

74.6%

Riverside, CA

$ 79,100

$ 368,800

57.1%

Phoenix, AZ

$ 79,200

$ 369,500

64.1%

Seattle, WA

$ 107,900

$ 503,100

47.6%

Minneapolis-St Paul, MN

$ 96,500

$ 450,200

73.3%

San Diego, CA

$ 96,600

$ 450,800

30.4%

St. Louis, MO

$ 78,700

$ 367,200

83.7%

Tampa, FL

$ 70,700

$ 329,800

69.3%

Baltimore, MD

$ 107,100

$ 499,300

77.6%

Denver, CO

$ 98,400

$ 458,800

51.4%

Pittsburgh, PA

$ 75,100

$ 350,400

81.7%

Portland, OR

$ 94,100

$ 438,700

48.8%

Charlotte, NC

$ 83,600

$ 390,000

71.8%

Sacramento, CA

$ 87,200

$ 406,800

45.7%

San Antonio, TX

$ 77,700

$ 362,200

73.4%

Orlando, FL

$ 72,500

$ 337,900

63.4%

Cincinnati, OH

$ 79,500

$ 370,600

78.1%

Cleveland, OH

$ 68,500

$ 319,300

79.2%

Kansas City, MO

$ 81,000

$ 377,600

72.4%

Las Vegas, NV

$ 73,800

$ 344,200

55.3%

Columbus, OH

$ 79,400

$ 370,300

71.2%

Indianapolis, IN

$ 75,000

$ 349,700

73.3%

San Jose, CA

$ 150,900

$ 704,000

28.4%

Austin, TX

$ 99,200

$ 462,600

75.2%

Zillow Group

 

i https://www.zillow.com/research/down-payment-trends-22360/
ii https://www.zillow.com/report/2018/buyers/money-home-financing/
iii Assuming a 30-year fixed rate mortgage with a 5 percent rate
iv Among the 50 largest U.S. metros

 

SOURCE Zillow Group

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