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While low mortgage rates have made purchasing a home more affordable, prospective homebuyers are still finding it difficult when it comes to coming up with a down payment. Additionally, price growth has pushed prices above incomes at a rate that hasn't been seen in several years, according to Zillow.
The Zillow report stated that while monthly payments have become more affordable, the statistics obscure the fact that the role that home prices are playing as they outpace incomes by an alarming level. Saving up for a down payment has become a financial barrier for potential buyers and more so first-time buyers. According to Zillow, more than 25% of first-time buyers reported difficulties in saving for a down payment. Furthermore, 40% of all buyers said they relied on a gift or a loan from family or friends to at least a portion of their down payment.
Home values are up 38.3% since September 2014 but incomes have grown less than 18.8% for the same period, according to the report. As a result, the typical U.S. home is now worth more than three times the medial annual homeowner income, according to Zillow's analysis.
"The path to homeownership, and the savings and wealth-creation benefits that come with it, has gotten harder for many buyers," said Zillow senior economist Chris Glynn. "Saving for a down payment is the single biggest challenge many potential homebuyers face, and it is especially difficult when incomes fail to keep pace with home values. Even still, many buyers sense that prices will slip further out of reach in coming years and desperately want to lock in low mortgage rates while they can, which is likely contributing to the urgency we're seeing in the market. The current environment is a double win for longtime homeowners who have enjoyed big equity gains and are now able to refinance their mortgage to lower their monthly payments."