Financial burdens keep adding up for first-time home buyers, as the American dream of homeownership inches away more every day.
First-time home buyers ages 25 to 44 in metro Boston spent about 66 percent of their gross monthly income on housing payments in the second quarter this year, according to an analysis NerdWallet published on Sep. 3. NerdWallet put the average listing price in metro Boston as $883,614 with an estimated monthly payment of $6,751.
"Boston is one of the highest-priced housing markets in the country, so payments are going to be higher there on average," said Elizabeth Renter, a senior economist at NerdWallet, a personal finance website. If buyers are willing to adjust their expectations on factors ranging from home features to location, she added, they are more likely to find a home "within a budget that fits the bill."
On a national level, Americans belonging to the first-time home buyer age group spent 49 percent of their income on monthly housing payments in the second quarter of 2024.
"Buying a home has always been an aspirational goal for younger adults, something you plan and save for. But the sheer lack of listings is putting this goal further and further out of reach," said Renter.
Regionally, Providence also made it on the list of metros where buyers end up spending more than the national average on housing payments: 57 percent. The estimated monthly housing payment in Providence stood at $4,508 in the second quarter.
According to the report, the housing payment includes the principal, interest, homeowner's insurance, real estate taxes, and private mortgage insurance. On a national average, the amount comes to $3,500.
California dominated the top three places on the list.
In the Los Angeles metropolitan area, the percentage of income spent on housing payments, according to the analyzed data, was 115 percent. The estimated monthly payment stood at $9,106, making it the highest in the country. Meanwhile, San Jose buyers spent about 73 percent of their income on housing payments, in San Diego, the number was 88 percent.
New York City also made the list. (No surprises there.) First-time home buyers spent 72 percent of their income on housing payments, the report said. The estimated monthly payment was $6,396.
These metros made the top 10 for highest share of monthly income spent:
For the median list price for a home, the analysis used monthly inventory data from Realtor.com, an online real estate marketplace. The median age of first-time home buyers is considered to be 35, according to the National Association of Realtors' 2023 Profile of Home Buyers and Sellers, which was also a source for the report.
The estimated monthly payment is assuming an 8 percent down payment.
"First-time buyers traditionally have lower incomes and less established credit than repeat home buyers," the report states.
If buyers are looking in high-priced markets such as Los Angeles or New York City, putting 8 percent down is not going to make the cut, according to the report. "Buyers in these markets will need higher-than-average incomes, larger down payments and flexibility on their side to become homeowners."
The report advises buyers to increase their down payment from 8 percent to 20 percent, noting that it can eliminate the private mortgage insurance requirement for most conventional loans. Increasing the percentage of down payment can also help cut down on the monthly housing cost.
"Lower mortgage rates and first-time home buyer programs that offer down payment assistance can be helpful," Renter said.