Price increases make it a challenging time for first-time home buyers to enter the market
Every major US metro will see home values increase in 2018, making it more challenging for first-time home buyers to get into the market, according to Zillow's home value forecasts.
Zillow forecasts the US median home value at $208,975 by September 2018, compared to the current $202,700 median. The estimate represents a 3.1% or $6,275 increase in value. This translates to an increase in the 20% down payment from $40,540 this year to $41,795 in September 2018. As a result, the average US buyer will need to save an additional $105 a month, or a yearly total of $1,260, to account for the increase in down payment costs.
Although home values are expected to increase by only 3.4% in San Jose, Calif., this translates to an increase of $35,934, the highest increase in terms of dollar value among all cities covered. A home buyer will then need $7,188 more next year to pay for a 20% down payment on the median home. This translates to an additional $599 per month in savings for a future home purchase.
Other markets where home buyers can expect to spend more for a down payment include Seattle, San Diego, and Riverside, Calif.
"Sky-high rents and rising home prices are putting first-time buyers in a bit of a catch-22," Zillow Chief Economist Svenja Gudell said. "Buying now with a low down payment can be riskier, and the offer may not be considered as competitive by the seller. However, a renter who saves for another year to reach a larger down payment may find that the home they love today is outside their budget a year from now. For those considering buying in the next year, getting into the market today may make more financial sense than they think."
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