A recent survey by the National Association of Home Builders showed that more than half of buyers who were actively looking for a home were unsuccessful – even after searching for three months – citing high prices as the main roadblock.
Additionally, a study from Zillow last week stated that it now takes three years longer for most Americans to live on their own than it did in 2000.
However, a recent study by SmartAsset showed that homeownership may not be too far out of reach for renters in certain markets.
Taking into account median income, effective income tax rate, median annual rent, median home value and average closing costs in each city, SmartAsset gave an estimate on the average time it would take for renters to save up for a home in the 100 largest U.S. cities.
In doing so, the company assumed renters in pursuit of homeownership would save 40% of their post-tax and post-rent income, annually. SmartAsset then calculated how long it would take for those savings to cover a 20% down payment and the average closing costs on the median-valued home in each city. Residents of the top five cities – provided they are able to save that much – could be in a home in less than four years, the study showed.
The top five cities where renters could quickly become homeowners include Toledo, Ohio; Irving, Texas; Columbus, Ohio; Fort Wayne, Indiana; and Detroit.
The 2017 Census estimated that median income for a resident in Toledo, Ohio, was $26,412, while the median annual rent sat at $8,100. The tax rate for individuals in that income bracket was 11.36%, leaving them with an average income of $15,313 after taxes and rent. With the median home value coming in at only $78,400, SmartAsset calculated that the average renter saving 40% of their post-tax and post-rent income could be in a home within three years and one month.
Irving, Texas, presented a different scenario, as the median home value – $187,700 – was the highest of any city in the study’s top 10. With an estimated closing cost of $3,475, the upfront costs for buying a home in Irving were $41,015. That said, the average income after taxes and rent was almost double the average in Toledo, Ohio, sitting at a little over $30,000. The higher income bracket help offset the housing cost, bumping the time needed for saving to about three years and four months.
The study heads back to Ohio for the third city on the list, as renters in Columbus, Ohio only need three years and eight months to save for a home. The median income after taxes and rent was $22,953, while the average upfront costs for the median-valued home are about $33,715.
Renters in Fort Wayne, Indiana should only have to save up for about three years and nine months, according to SmartAsset, putting the city at the No. 4 spot on the list. With a median income of $30,225 after rent and taxes, it wouldn’t take long for the average rent to save up for a home, as the average home value sat $117,900.
Completely opposite from Irving, Texas, Detroit’s average upfront costs for a home are the lowest of any city in the study’s top 10. The median home value was only $50,200, and the average closing costs were around $4,367. However, the average post-tax, post-rent income was just under $10,000, meaning renters would have to save for about three years and 10 months.
The remaining cities in the top 10 included Memphis, Tennessee; Cleveland; Omaha, Nebraska; Garland, Texas; and Fort Worth, Texas.