Philly has long been a homeowner’s city, with a majority of residents choosing to buy over rent. Still, like the rest of major U.S. cities, there’s still a good chunk of Philadelphians who rent, often spending more than 30 percent of their income each month.
So what is keeping Philly renters from making the leap from apartment to home? There are a few factors, but the biggest barrier is that they think they can’t afford a down payment.
That’s according to the first annual Zillow Housing Aspirations Report, which found that 67.5 percent of renters in the Philly metro said saving for a down payment was keeping them from buying.
Philly renters aren’t alone in that. Of the 10,000 people surveyed in 20 major U.S. metros, about 68 percent cited the same reason.
It’s true in Philly that average monthly mortgage payments cost less than the average monthly rent. But Zillow researchers noted that a 20 percent down payment on a typical U.S. home costs more than two-thirds of the national median annual household income. That makes it especially tough for renters, who have to put a good chunk of their income toward monthly rent all while trying to save for that 20 percent down payment:
For renters trying to save for a down payment on a home, it can often feel like trying to hit a moving target. A renter saves up enough to put a decent amount down on a home in their price range, perhaps only to find out that home has appreciated in value beyond their means.
These were the top five cited barriers to homeownership among Philly renters:
- 67.5 percent - down payment
- 54.6 percent - debt
- 49.3 percent - qualifying for a mortgage
- 35.2 percent - job security
- 19.3 percent - not in a position to settle down
But all of this doesn’t mean renters won’t eventually become homeowners. In fact, millennials were most likely to say that they see themselves buying in three to five years compared to any other generation. Only 2 percent said they plan to be life-long renters.