The Savings Math
Most first-time buyers don't put 20% down. The median down payment among first-time buyers in 2024 was 9%,[2] which amounts to $37,530 on a $417,000 home. That number is more tractable - but the path to it is longer than it looks.
Renters earn less than the national median. The median renter household income in 2024 was approximately $52,000.[4] At a 10% savings rate - disciplined, but achievable - that produces $5,200 per year available for a down payment. At that pace, reaching a 9% down payment takes 7.2 years. Add standard closing costs of 3-4%, and the target rises to roughly $50,000, extending the timeline to nearly 10 years.
Years to Save - First-Time Buyer on Median Renter Income
Assumes 10% savings rate on $52,000 median renter income ($5,200/year)
Sources: NAR 2024 Profile of Home Buyers and Sellers[2]; Census Bureau renter income data[4]
These calculations assume home prices remain static over the saving period. They don't. Between 2014 and 2024, median home prices rose 89%.[1] A buyer who began saving in 2019 with a $30,000 target found by 2024 that the same 9% down payment required $37,530. The finish line moved faster than they could run.
Starter Homes No Longer Start Low
The national median price includes high-end properties that distort the picture upward. For first-time buyers, the relevant market is the bottom third. That segment has not been more affordable. Entry-level homes - those priced below $250,000 - have declined as a share of the active inventory from roughly 45% in 2014 to under 20% today.[5]
Institutional investors and corporate landlords have disproportionately targeted lower-priced properties. Cash buyers don't need a 7-year savings runway. A private equity fund that acquired 50,000 entry-level homes between 2012 and 2022 absorbed inventory that would otherwise have passed to first-time buyers at each sale cycle.
The Entry-Level Shortage
Homes priced below $250,000 made up less than 20% of active listings in 2024, down from 45% a decade earlier.[5] Corporate and investor buyers concentrate at the lower end of the market, where their cash advantage over mortgage-dependent buyers is greatest.
The PMI Penalty
Buyers who reach 9% down but not 20% face private mortgage insurance (PMI), typically 0.5-1.5% of the loan balance annually.[6] On a $380,000 loan (after a 9% down payment), PMI adds $1,900-$5,700 per year - $158-$475 per month - until the borrower reaches 20% equity. That adds cost to the monthly payment at precisely the moment the buyer is already stretched.
The practical effect: many first-time buyers who manage to close are paying more per month than they would if they'd entered the market five years earlier at lower prices with a smaller loan.
Policy Connection
The down payment barrier is a symptom of the price pressure described throughout the Affordability and Immigration Act. Three of its five proposals directly address forces that inflate entry-level prices:
- -Policy 1 ends corporate and institutional ownership of single-family homes, redirecting entry-level inventory back to owner-occupants.
- -Policy 4 ends foreign cash purchases, which are concentrated in markets where first-time buyers compete directly.
- -Policy 5 incentivizes construction of entry-level and starter housing through federal-local production partnerships.
Sources
- National Association of Realtors: Existing Home Sales and Median Price Data - Historical median home prices 1990-2024
- National Association of Realtors: 2024 Profile of Home Buyers and Sellers - First-time buyer share, median down payment percentages
- U.S. Census Bureau: Historical Income Tables - Median household income 1990-2024
- U.S. Census Bureau: American Housing Survey - Median renter household income by tenure
- National Association of Realtors: Realtors Confidence Index - Entry-level inventory share trends 2014-2024
- Consumer Financial Protection Bureau: Private Mortgage Insurance Explainer - PMI rate ranges and cost structure