Zillow found that most renters that reside in some of the nation’s largest cities are setting aside around 30% of their monthly income just to pay their rent.
Despite this, the report also noted that those opting for homeownership are experiencing troubles of their own, with saving for a 20% or 10% down payment becoming gradually harder for first time buyers.
First-time buyers and millennials, the report suggested, are looking into other creative ways to come up with the down payment for their mortgages. In 2014, 13% of home purchases were made possible due to loans or gifts from family or friends for the down payment.
“In general, paying a mortgage is more affordable than renting, and has been for some time. Unfortunately, many current renters aren't able to realize the savings that come with homeownership because as home values and rents keep rising, it's getting increasingly difficult to clear the down payment hurdle,” said Svenja Gudell, Zillow chief economist.
Gudell explained that down payments can represent savings of considerable value when put against rents. She also warned that down payments are moving targets, and as home values rise, so will down payments, prompting renters to pay more and leave less for their savings.
“Using a smaller down payment is an option, but often comes with the added cost of mortgage insurance. Knowing this, it's no wonder that many current renters are waiting longer to buy a home and are turning to alternate sources, including friends and family, to help them scrape together a down payment,” she explained.
On average, homeowners in America can expect to spend 15% of their income on a mortgage.