A new study from RentCafe identified the US metro areas where renters can save to buy their first home the fastest.
Researchers Used Popular “50-30-20” Budget Formula to Compile List
Not long ago, Senator Elizabeth Warren from Massachusetts popularized a budget formula known as “50-30-20” which guides consumers on how much and where to spend while saving money to buy a home. Here are the specifics:
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- 50% of income is allocated for unavoidable “needs” or costs such as rent, groceries and utilities
- 30% of income is allocated for “wants” such as eating out, alcohol, entertainment and gym memberships
- 20% of income is allocated for not-to-be-touched/spent “savings” such as saving for a down payment on a house to buy
Obviously, in some metro areas, allocating just 50% of a renter’s income to unavoidable needs like rent and groceries isn’t realistic. In other metros, the combination of salaries, costs and home prices may result in a relatively quick path to homeownership.
Also obvious is that the less households spend on “wants,” the faster households can increase their savings dedicated towards their savings.
Metro Areas Where It’s Faster to Save for 20% Down Payment
RentCafe based its analysis on a median-earning two-person household saving for a 20% down payment on a median-price starter home.
Metro Median Price 20% Down Payment Months to Save
Bloomington IL $105,249 $21.050 12
Springfield IL $81,901 $16,380 15
Cedar Rapids IA $117,181 $23,436 21
Trenton NJ $164,490 $32,898 22
Ann Arbor MI $228,996 $45,799 28
Bismarck ND $212,918 $42,584 28
Bridgeport CT $303,031 $60,606 29
Fargo ND $187,766 $37,553 29
Madison WI $242,538 $48,808 30
Des Moines IA $154,720 $30,944 31
Hartford CT $198,000 $39,600 32
Fond du Lac WI $122,982 $24,596 32
Champaign IL $102,166 $20,433 32
Baltimore MD $211,039 $42,208 33
Waterloo IA $91,403 $18,806 34
Washington DC $341,444 $68,289 34
Cincinnati OH $151,092 $30,218 35
Akron OH $104,637 $20,927 37
Decatur IL $46,696 $9,339 38
Naples FL $262,944 $52,589 39
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Thanks to RentCafe.
