Buying a Home in NYC: Exploring the Generational Differences. How Much Time Is Required To Save For The Down Payment?

A recent study carried out by real estate platform Point2Homes.com analyzed the generational differences between prospective homeowners across the country. The results were rather extraordinary, to say the least, with some huge disparities among the expectations and realities faced by the various age groups surveyed. When it comes to New York City, there are some curious findings, and you may be surprised by the results.

Let’s take a closer look.

What is the study all about?

Home buying power across the generations.  Image Credit - Point2Homes

Home buying power across the generations. Image Credit – Point2Homes

Buying a house is part of the American dream. However, the down payment appears to be one of the biggest hurdles faced by prospective buyers. Point2 decided to crunch the numbers and put things into perspective.

In this study, they explore how long it would take for each generation to save up a 20% down payment in the 100-most-populous cities in the U.S. They calculated the median income per city, based on the following generational age groups;

  • Gen Z (15-24)
  • Millennials (25-44)
  • Gen X (45-54)
  • Younger baby boomers (55-64)
  • Older baby boomers (65+)

By taking the median house price for each city, they were then able to calculate just how long it would take to save up the full 20%. The study assumes that home-seekers save 17% of their income for a down payment. The survey also looks at buyer expectations with regards to how much they need to save for a down payment, how quickly they expect to be able to buy, their current savings, and what type of home they plan to purchase.

So, what did they find?

Varying trends across the country

The results of the study vary wildly from generation to generation and place to place. On the upper extremity of the scale, hopeful Gen-Z buyers in Irvine, California, would need to spend up to 94 years saving for a 20% down payment in the city — that’s more than the average life expectancy! On the other end of the scale, a high-flying Gen X-er in the Midwest could save the total amount within 2-years.

For the most part, buyers seem to have fairly similar expectations and desires despite generational differences. This could be due to the fact that more people have been able to put a lot more money aside in savings over the last year. The average savings rate increased from 8% to 17% over 2020, with the pandemic restricting spending across the country.

In the past year, the National Average Saving Rate has increased from 8% to 17%. Image Credit - Point2Homes

In the past year, the National Average Saving Rate has increased from 8% to 17%. Image Credit – Point2Homes

A strong desire to own a (large) home and soon

From Baby Boomers to Gen Z, there’s a strong desire to own a home. Single units are overwhelmingly more desirable than condos, with many participants citing the need for more space. The current trend of working from home can perhaps be held responsible for this way of thinking — if you’re living and working there, it goes without saying that your home needs to be spacious enough. Around 50% of people from all generations want a home that is larger than 1,000 square feet, while around 20% of Millennials and Gen X-ers would prefer more than 2,000 square feet.

Potential buyers want more, and they want it now. Most people who completed the survey said that they expect to buy their new home within 3 to 6 months, though a good chunk of Gen-Z-ers and older Baby Boomers admitted they weren’t sure.

Unrealistic expectations making it difficult to buy

While savings may have increased for many, perhaps lending a touch of confidence to would-be homeowners, it’s worth noting that the median sales price for homes across the country has also increased. This increase is typically much stronger than the increase in savings, with the national median home sales price reaching $346,800. This results in an average 20% down payment of around $70,000.

With house prices varying drastically across the country, typical down payment sums range from anywhere between around $10,000 and $250,000. Despite this, when surveyed, the majority of potential buyers fully expected their down payment to be less than $10,000, with 52% of Gen Z-ers and 40% of millennials seemingly falling prey to this wishful thinking.

While half of home seekers would like to buy in the next six months, most have unrealistic down payment expectations. Image Credit - Point2Homes

While half of home seekers would like to buy in the next six months, most have unrealistic down payment expectations. Image Credit – Point2Homes

Furthermore, a fair chunk (14%) of would-be-buyers across the generations didn’t yet have anything saved up, and more still (34%) didn’t yet manage to put aside their anticipated $10,000. This suggests that regardless of saving more, these savings aren’t going towards a new home. Indeed, the vast majority (38%) of potential buyers put fewer than 10% of their income into saving for a down payment. Gen Z-ers are particularly guilty of this, with just under 50% failing to put more than 10% aside.

So what does this mean for NYC?

The results of this study are a bit of a mixed bag, with good news and bad for people from different generations. Before we dive in, let’s take a look at the stats for New York City:

  • Median home price: $673,834 — which means NYC ranks the ninth most expensive city in the study. However, the difference in median house prices compared to more expensive cities is quite drastic, with prices around 50% lower than in San Francisco, CA, for example.
  • 20% down payment: $134,767 — quite a lot higher than the national average of around $70,000.

When we look at how long it will take each generation to save for that down payment based on their median household income, it’s good(ish) news for millennials. A typical millennial in NYC can expect a median household income of $80,836. Assuming they put 17% of their income towards saving for a down payment, it should take just under 10 years to save up the 20%.

Gen Z Buyers would need more than 10 years to save for a down payment. Image Credit - Point2Homes

Gen Z Buyers would need more than 10 years to save for a down payment. Image Credit – Point2Homes

On the whole, NYC ranks as the 6th city with the longest time required for saving for a down payment for millennials. This may sound like a lot, but it’s somewhat quicker than the other generations:

  • Gen Z: 18.1 years (10th city with the longest time required for saving for a down payment)
  • Gen X: 11 years (3rd city with the longest time required for saving for a down payment)
  • Young baby boomer: 11.5 years (3rd city with the longest time required for saving for a down payment)
  • Older baby boomer: 20.2 years (4th city with the longest time required for saving for a down payment)

Is there any good news for young buyers in NYC?

While the results of this study may be a little overwhelming at first, don’t give up on your NYC homeownership goals just yet! The city offers a few first-time buyer schemes that can help you smash your down payment target.

HomeFirst Downpayment Assistance: this handy scheme can help eligible first-time buyers with as much as $40,000 towards their down payment or closing costs on a 1-4 family home, condo, or co-op, within one of NYC’s five boroughs.

State of NY Mortgage Agency (SONYMA): SONYMA offers several schemes to help first-time buyers live the dream. With low-interest rates and as little as a 3% down payment, as well as schemes for veterans and fixer-upper homes, it’s a great way to get a foot on the property ladder.

 

 

Andra Hopulele

With a passion for all things real estate and home design, Andra covers the impact of housing issues on our everyday lives. She writes about the financial implications of the new generations entering the housing market and about the challenges of homeownership. Andra can be reached at [email protected]

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