Starter Home Prices Growing Faster Than Renters' Incomes

Jul 8, 2021

With Jacksonville housing prices soaring, it might take longer to save up enough to buy a starter home.

The average price of a starter home in Jacksonville has risen to $173,644 this year, according to online real estate company Zillow. Zillow estimates that nationally - on average - it takes an extra year to save enough for a down payment on a starter home than it did five years ago. Overall, as of May, the median home value in the Jacksonville metro area had shot up 13,7%, compared to a year ago, to $271,909, according to Zillow.

The company estimates it will take the average Jacksonville rental household three-and-a-half years to save enough for a 10% down payment, assuming a mortgage rate of 3% that includes property taxes and insurance. That would result in an average monthly mortgage payment of $1,045. (For those who can save up enough, that still beats the average monthly rent in Jacksonville, which has risen 8% to $1,196 so far this year, according to Rent Cafe.) 

And for those trying to save up enough for a 20% down payment on a starter home, the challenge is even more daunting, taking the average rental household 6.9 years to save up enough. 

"Without the equity from a previous home sale, first-time home buyers face more challenges in coming up with a down payment," said Zillow economic data analyst Nicole Bachaud in a news release. "In a housing market where prices are rising at record rates, especially when compared to renter incomes, the ever-increasing sum of a 20% down payment can feel out of reach. The good news is that buyers who want to take advantage of today's low mortgage rates can do so without putting a full 20% down ― most conventional mortgages allow as little as 3% to 5%.”

However, low down payments often come with additional risk.

After the housing collapse of 2006-7, tougher lending practices were put in place. Then in 2014, a federal directive resulted in government-controlled mortgage giants Fannie Mae and Freddie Mac loosening up again, allowing first-time homebuyers to put down as little as 3%.

Edward Pinto, director of the American Enterprise Institute's International Center on Housing Risk, told NPR at the time that if you put 3% down and housing prices start falling even a bit, you can quickly owe more than your house is worth.

"The last run that ended poorly with the housing price collapse in 2006-7" began in 1994 said Pinto, when "Fannie announced it would start doing 3%-down loans." 

Bill Bortzfield can be reached at bbortzfield@wjct.org, 904-358-6349 or on Twitter at @BortzInJax.