Moving Home Could Help Some Renters Save for a Down Payment

The pandemic has had what’s been referred to as a K-shaped pattern, meaning that while the economy as a whole experienced a decline as the coronavirus began to spread, the pattern of recovery has diverged. Some industries have recovered well and are even doing better than they were before the pandemic, while others continue to be held back by adaptations to the pandemic.  

A similar pattern is playing out among individuals. In a survey earlier this year, while many were worried about income and job stability, some prospective home buyers reported being able to save more because they were staying at home, presumably forgoing spending at restaurants, bars, and other establishments, while shelter in place orders were widespread.

Young people moved back in with their parents in record numbers last year in the wake of the pandemic.

For young people who have been able to channel that would-be rent into savings, the prospect of homeownership has become more of a reality.

Not everyone who moved back home fits into that category. But for those that do, homeownership may be closer than they realize.

Across the 20 largest metros, if people living at home saved up that rent money, it would take an average of 15 months in order to save up for a 5 percent down payment for a home in their area.

The easiest metro to save up is Chicago where the median listing price for a home is $327,000. With a median 1-bedroom rent of $1,521, it would take 11 months to save for the 5 percent down payment of $16,350. For young people at home who are able to channel that rent money into savings, they could be homeowners in under a year.

The most challenging of the 20 largest metros is Los Angeles, one of the most expensive housing markets in the country, with a median listing price of $999,000. With a median 1-bedroom rent of $2,250, it would take 22 months to save for the 5 percent down payment of $50,000. For young people at home who are able to channel that rent money into savings, they could be homeowners in just under two years.

Nationally, the median listing price for a home is $340,000. With a median 1-bedroom rent of $1,533, it would take 11 months to save for the 5 percent down payment of $17,000.

It’s worth noting that typical down payments can vary a lot across metro areas. This analysis focused on a 5 percent down payment because it’s a nice round number close to the typical down payment that younger buyers have historically made. And in half of the 20 largest metros, 5 percent is also the typical down payment made by all home buyers financing their purchase with a mortgage. However, across the 20 largest metros, the typical down payment can be higher, clocking in at 20 percent in the pricey, competitive San Francisco metro area. 

No matter their location, young people who are able to remain gainfully employed and cut back on housing costs because they move back with family to ride out the pandemic will be able to amass significant savings and likely become homeowners sooner than otherwise expected. This is yet another example of the K-shaped recovery at work. 

Months of Rent Needed to Save for a Typical Down Payment (20 largest metros)

Methodology

Listing and rental data from December 2020.