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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After earning her bachelor’s degree in journalism at the University of Central Florida, Tracey set out in the real world at Florida Realtors in 1994 as a communication assistant, working her way up to editor in chief of Florida Realtor magazine. In 2004, she left the association to start her freelance writing and editing business. One of her first clients was REAL Trends, and she started working for the organization in 2005. In 2014, Tracey was promoted to editor in chief of publications for REAL Trends. She handles the writing and editing of all REAL Trends publications and marketing materials, including LORE Magazine, the REAL Trends newsletter and the blog. She is also the primary podcast interviewer where she conducts interviews with top real estate industry leaders and affiliated industry leaders. Tracey is married with two children.

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