How Long Does It Take to Afford a Down Payment in Each State?

The traditional American dream typically begins with great jobs, two kids, and a family home to grow in. If you’ve been dreaming of buying a house, then you’ve likely considered the financial factors, including saving and budgeting for the home. Just as America is huge and diverse, so is its housing market. 

The average home price in America is $270,726, which may be startling to homeowners in West Virginia, where the average home value is just $107,840. On the other end of the spectrum, families in Washington, D.C. can expect to pay over $700,000 for a home. There are huge differences in both income and housing costs across the country, which is why we set out to see just how long it would take to afford a home in each state. 

If you’re looking to buy your first home, then you already know you have to save for a down payment. We recommend you have 20 percent of the home’s value as a down payment — be sure to save extra for closing costs. Otherwise, it’s important to choose a home and mortgage that keep your monthly payments within 30 percent of your income to best manage your living expenses.

We used the above budgeting parameters to determine how long it will take to save for a down payment and also cover home affordability in your city so you can better plan your home purchase. 

Here’s what we found:

  • On average, it takes an estimated 51 months, or 4.25 years, for an American household to save for a 20 percent down payment. 
  • $54,145 is the average 20 percent deposit on a single-family home in America. 
  • It would take an estimated 109 months, or 9 years, to save for a 20 percent deposit on a home in Hawaii — the longest amount of time of all U.S. states.
  • West Virginia homebuyers can save for a down payment in the least amount of time — approximately 29 months. 

How Long Until You Can Afford a Down Payment?

The cost of living and home prices in a given area are heavily correlated, which is why location has such a large influence on your housing prices.

Home prices respond to supply and demand just as other financial assets and costs do. When more people can afford homes, the price rises with the competition among potential homeowners. 

Alternatively, when fewer people can afford homes, then the competition is between sellers, and they’ll drop their prices to get the home sold quickly. 

States Where Saving for a Down Payment is Slowest

High costs of living may leave little room for savings while requiring a larger down payment to begin with. It’s no surprise that the states we found to take the longest to save are also the most expensive to live in.

1. Hawaii

Hawaii’s islands offer tropical paradise, but that comes with a hefty price tag. When you consider the logistics of shipping materials and belongings to the island, the limited residential space, and the desirability of real estate as a whole, it’s no surprise that Hawaii has the second-highest median home value in the U.S. at $727,391. If you’re looking to buy a home in Hawaii you’ll need to save about $145,000 for a down payment, which will take an estimated nine years of saving. 

While the homes are expensive, rent in Hawaii will only save you about $500 a month — which is why homeownership is still more popular in the Aloha state than renting. 

2. Washington D.C.

The District of Columbia tops our list of having the most valuable homes, beating out Hawaii by just over $10,000. While the homes cost more, households also make more with a median income of $85,203 each year. Saving for a down payment will take you 104 months, just short of nine years, to save the $148,000 you’ll likely need for a deposit. 

3. California

California takes third place on our list with a nearly $140,000 drop in median home value, while bringing home a median income of $75,277 a year. It will still take you an estimated 94 months to save for a $117,610 deposit. This is in part because 54 percent of California households own their homes, making it a more competitive market despite the healthier income-to-home value ratio.

States Where Saving for a Down Payment is Fastest

Rural states tend to have less densely populated cities and more land available than popular coastal cities, which is why the cost of owning a home in these states can drop hundreds of thousands of dollars on average.

1. West Virginia

The mountain state of West Virginia has the lowest median home value at $106,840, as well as the lowest median household income at $44,097. Still, you’ll only need to save for 29 months to cover the approximate $21,368 down deposit. This is a huge contrast from their pricier neighbor Washington, D.C., and the savings may even be worth commuting out of state. It’s no wonder that nearly 73 percent of households here own their homes. 

2. Oklahoma

Oklahoma and Iowa actually tie for second place, each taking just 31 months to save for a 20 percent down payment. Oklahoma nudges ahead with cheaper home prices around $134,995 and a suggested $27,000 deposit. 

3. Iowa

Further north in Iowa, you can still expect to save for your home in under three years, but you’ll be putting nearly $4,500 more down. The good news is that you also likely make about $8,000 more than the median household in Oklahoma. That increased earning may be why 72 percent of homes in Iowa are owner-occupied. 

Home Affordability in the U.S. 

After looking at home affordability on a state level, we wanted to focus on cities to find those most and least friendly to homebuyers looking to stretch their dollar. Using data from the National Association of Realtors, we pulled the most and least affordable home rates in each region. Here are the cities that made the list:

 

Tips to Save for a Down Payment

There are a few things you can do to ensure your financial stability when you decide you’re ready to become a homeowner. In many ways, you can save money owning a home over renting, but it’s costly upfront and you’ll have to consider maintenance, too. The more you plan now, the less you’ll have to worry about mortgage forbearance, or worse, foreclosure. 

  • Review your budget to determine how much you can afford to pay on housing each month — ideally less than 30 percent of your monthly income. 
  • Determine your housing needs so you know how much your ideal home may cost for accurate planning.
  • Begin saving up to 20 percent of your budget, but don’t cut your retirement or rainy day savings. 
  • Start a side hustle to earn extra money and fast-track your savings goals. 
  • Improve your credit score to lower your mortgage rates and improve your chances of approval. 

Owning your own home is a great investment for your finances and your future, but it’s not without risk. A 20 percent down payment is one of the best ways to ensure you get a great deal on your home and maintain affordable mortgage payments. 

A robust down payment is an essential step in any financially responsible homeowner’s journey, but you still need to ensure your monthly mortgage payments will be affordable. Once you begin saving your down payment, consider how much you can afford to pay, what the average interest rates are in your area, and how much your preferred home style will cost to determine how much home you can afford

Methodology

To determine how long it would take to save for a 20 percent deposit on a home, we used median household income data from the U.S. Census (2018) to determine how much someone could reasonably save each month (20 percent of their income). We then compared that savings amount to the median value of a single-family home for each state, provided by Zillow.

Sources: Census 1 | Census 2NAR Realtor | Zillow | Move | World Population Review

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