Money

Can Renters Buy a First Home in 100 U.S. Cities?

Data & Guides Money Can Renters Buy a First Home in 100 U.S. Cities?

Saving for your first home can be tough. The down payment, closing fees, and moving costs that need to be paid can surprise many, especially as the fees vary so much across the U.S.

This study reviews the costs needed to buy a first home in the largest 100 cities across the U.S. [1] World Population Review, ‘The 300 Largest Cities in the United States by Population 2023’ https://worldpopulationreview.com/us-cities for a single person renting to factor how much they may be able to save in a typical month and how this compares to the cost of purchasing a first home.

See how average expenditures and earnings compare to the cost of homebuying around the country below.

Key findings:

• The average amount needed to cover closing fees, moving expenses, and a down payment across the 100 largest cities in the country, is $34,693.
• Single renters with average earnings and expenses in New York, Miami, and San Juan, would not be able to afford to save money to put toward a down payment.
• Single renters in New Orleans would only be able to save $157 a month, while those in San Jose could save $4,238 a month based on their much higher average earnings.
• The average monthly outgoings for a single renter are $2,897 nationally.

Best cities for first-time homebuyers

The following shows the best and worst cities for local first-time homebuyers who are currently renting.

The monthly saving potential accounts for average earnings compared against typical rent, bills (internet, water, electricity, gas), and living expenses (food, clothing, entertainment, healthcare, transport).

For those cities where monthly average living expenses are more than average earnings (Miami, New York, San Juan) you can see a deficit, indicating, the average person in that city isn’t able to save anything, so therefore, is not able to start saving towards a down payment.

For full details on how the findings of this research were calculated, please see the methodology information below.

The average single first-time homebuyer, now aged 36, [2] NAR, ‘2022 Profile of Home Buyers and Sellers’ https://cdn.nar.realtor//sites/default/files/documents/2022-highlights-from-the-profile-of-home-buyers-and-sellers-report-11-03-2022_0.pdf could have access to monthly savings in 52 out of 100 cities if they lived an average lifestyle with typical expenditure, meaning the dream of owning a home in the future isn’t completely out of reach. This does however assume a regular expenditure and does not account for any emergency spending, which can be the shock that harms many people’s saving journeys.

Adjusting for inflation, average earners in San Jose, CA, take home $8,196 each month in 2023 (largely impacted by Silicon Valley’s tech salaries), and with an average expenditure, an individual could, on paper, save $4,238 a month. However, to afford the average down payment, closing fees, and moving fees, $114,140 would be needed, therefore the ability to save money is not a quick route to owning a home in the city. 

Individuals renting in Miami, New York, and San Juan while having normal expenditures are unlikely to be able to save any money each month due to average earnings not meeting average living expenses. Those in Miami would need an extra $284 to cover their expenses, New Yorkers would need an extra $349, while the average single person’s earnings do not come close to matching average expenditure. 

Reviewing this data does suggest that couples, as you may expect, would be in a much better position for purchasing a home. This is due to the fact that they can share rent and bills. An analysis of BLS data shows that there is only a 27.86% difference in bills for a single person living on their own and a couple living together. [3] U.S. Bureau of Labor Statistics, ‘Table 1502. Composition of consumer unit: Annual expenditure means, shares, standard errors, and coefficients of variation, Consumer Expenditure Surveys, 2021’ https://www.bls.gov/cex/tables/calendar-year/mean-item-share-average-standard-error/cu-composition-2021.pdf If a couple were to both earn the average wage, the saving potential would be significant. 

Best large cities when saving for a first home

Below are the top ten cities for first-time homebuyers when ranked by the amount an average individual, earning the average wage, would have left to save each month after paying for rent and living expenses. 

1. San Jose ($4,238)
2. Oakland ($3,488)
3. San Francisco($2,745)
4. Baltimore ($2,635)
5. Seattle($2,535)
6. Newark ($2,518)
7. Washington ($2,461)
8. Boston($2,205)
9. St. Paul ($2,157)
10. Minneapolis ($2,126)

Worst large cities when saving for a first home

Some of the worst cities in the country have a higher cost of living, among other factors, which means the average first-time homebuyer would not be able to afford the average lifestyle each month. These individuals spending and earning the average amount are unlikely to be able to save for a home without a salary increase and/or spending decrease. 

This has been highlighted below by referencing the debt the average first-time buyer would be in per month. Here are the worst cities for first-time homebuyers in the U.S.

1. San Juan (-$2,415 in debt)
2. New York (-$349 in debt)
3. Miami (-$284 in debt)
4. New Orleans ($157)
5. Henderson ($312)
6. Scottsdale ($337)
7. Irvine ($357)
8. Arlington ($367)
9. Fresno ($422)
10. Bakersfield ($495)

How can first-time homebuyers buy property faster? 

Across the top 100 cities analyzed, the average individual first-time homebuyer spends an estimated $2,120 on entertainment (adjusted for inflation) [4] U.S. Bureau of Labor Statistics, ‘Consumer Expenditure Surveys’ - ‘Expenitures’ data at ‘Regional residence’ was collected for each region analyzed https://data.bls.gov/PDQWeb/cx each year which could be reduced to help speed up their first step on the property ladder. 

Additionally, the average individual first-time homebuyer in this study spends an average of $4,780 on food (adjusted for inflation) [4] U.S. Bureau of Labor Statistics, ‘Consumer Expenditure Surveys’ - ‘Expenitures’ data at ‘Regional residence’ was collected for each region analyzed https://data.bls.gov/PDQWeb/cx both groceries at home and food from restaurants and for takeout. Where possible, it can help to budget for groceries and reduce spending on excess food, although this may not be possible for every person.

Small lifestyle changes can help people get on the property ladder quicker, however, as the data shows, some areas like New York or Miami, are statistically more challenging for first-time homebuyers and need a large salary to begin to compete in the local housing market. 

Methodology

The study compares expenditure to earnings to calculate how much money would be left for the average person in that city to save toward a down payment. The full breakdown of how it was calculated and how this relates to the main table of data can be found below. 

[a] Property prices were taken from Zillow data [5] Zillow, Zillow Home Value Index (ZHVI) ‘Single Family Homes’ https://www.zillow.com/research/data/ in each city for a single-family home in 2023 as most people purchase this type of property. [6] NAR, ‘2022 Home Buyers and Sellers Generational Trends Report’ https://www.nar.realtor/sites/default/files/documents/2022-home-buyers-and-sellers-generational-trends-03-23-2022.pdf Funds needed to buy this example home consists of a 6% down payment (the average for first-time homebuyers) [2] NAR, ‘2022 Profile of Home Buyers and Sellers’ https://cdn.nar.realtor//sites/default/files/documents/2022-highlights-from-the-profile-of-home-buyers-and-sellers-report-11-03-2022_0.pdf average closing fees as a percentage of property price (averages determined at a state level) [7] ClosingCorp, ‘CLOSINGCORP REPORTS AVERAGE CLOSING COST DATA FOR PURCHASE MORTGAGES IN 2020’ https://www.closing.com/wp-content/uploads/2021/03/CC_2020ClosingCostsReport_FINAL_031121.pdf and a flat national moving fee based on a moving cost calculator [8] moveBuddha, ‘Moving Cost Calculator’ https://www.movebuddha.com/moving-cost-calculator/ which estimates the average for a 1 bedroom residence ($542-$1162), price estimate taken in May 2023 and assumes the move will be within state.

[b] Household income from the BLS’, American Community Survey, for 25-44-year-olds [9] United States Census Bureau, ‘American Community Survey’ https://data.census.gov/table?q=income&g=040XX00US04,48&tid=ACSST1Y2021.S1903 was used to reflect the age that someone would typically be purchasing their first home. This data was inflated to 2023 to match the rent and house prices using the BLS Employment Cost Index Summary, April 2023, average compensation percentage change which includes wages, salaries, and benefits. [10] U.S. Bureau of Labor Statistics, ‘Employment Cost Index Summary’ https://www.bls.gov/news.release/eci.nr0.htm The average number of earners per household allowed us to determine how income was split to estimate one person’s finances in the city.

[c] Outgoings consist of average rent per city for a one-bedroom apartment, [11] Zumper, ‘Zumper National Rent Report’ https://www.zumper.com/blog/rental-price-data/ BLS average household expenditure for food, clothing (apparel), transportation, healthcare, entertainment, [4] U.S. Bureau of Labor Statistics, ‘Consumer Expenditure Surveys’ - ‘Expenitures’ data at ‘Regional residence’ was collected for each region analyzed https://data.bls.gov/PDQWeb/cx and utility bills including electricity, [12] U.S. Energy Information Administration, ‘2021 Average Monthly Bill- Residential’ https://www.eia.gov/electricity/sales_revenue_price/pdf/table5_a.pdf gas, [13] U.S. Energy Information Administration, Natural Gas Prices (Dollars per Thousand Cubic Feet) https://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PRS_DMcf_m.htm water, [14] Wisevoter, ‘Water Prices by State’ https://wisevoter.com/state-rankings/water-prices-by-state/#water-prices-by-state and internet access. [15] HighSpeedInternet, ‘States That Pay the Most and Least for Internet in 2020’ https://www.highspeedinternet.com/resources/state-cost-of-internet These costs were inflated to March 2023 using the BLS CPI Inflation calculator. [16] U.S. Bureau of Labor Statistics, ‘CPI Inflation Calculator’ https://www.bls.gov/data/inflation_calculator.htm