A recent report says that home prices are rising faster than wages are, making it difficult to save the amount of money needed to put a down payment on a home. Factors like student loan bills, child care costs, and higher rent make it additionally difficult for people to save enough money.
According to a recent report from Zillow, average first-time buyers of homes today purchase a house that costs 2.6 times their annual income. This is due to a gradual increase in home prices over time, while wages have seen a considerably less proportionate climb. In the 1970s, the median price for a first-time home was $87,300, while the median income was $54,000. Between 2010 and 2013, the median price for a first-time home was $140,000, while the median income, shockingly, remained the same as it was 40 years ago — $54,000.
“We’re seeing that first-time home buyers are renting for longer,” Zillow’s chief economist, Svenja Gudell, explains. “Homes are more expensive so it takes them a while to get to that stage in their life.”
Even rent prices are increasing, making it harder for people to save more money while they rent. Even still, people are spending more time renting while they save up for home ownership, renting for an average of six years before buying. These home buyers are also less likely to be married now than they were in the 1970s. And even after saving, these buyers often still have trouble finding a house that they can afford.
Some suggest that emphasis on early saving can help Millennials prepare for home ownership, but if the market continues to raise prices while wages flatline, it may take more than a little monetary diligence to sort out the gap.