How Long Will It Really Take You to Save for a Home?

How Long Will it Really Take You to Save for a Home?

Let’s look at a few different sources and get conflicting advice!

So you read last week’s post about how Millennials may not have enough money to buy homes in major metropolitan areas (even with savings and family help), and you decided to take Bloomberg’s advice and consider relocating to a city with a better real estate market.

Some Millennials Won’t Be Able to Buy Homes Even With Savings and Parental Help

Before you start making plans about your new life in a slightly smaller metropolitan area (which, by the way, will quickly become a slightly larger metropolitan area if enough Millennials move there; this economic advice is predicated on the idea that most people won’t be able to take it), you’ll want to check out this new chart from GoBankingRates that lists how much money you’ll need to earn to live comfortably in 50 American cities.

How Much Money You Need to Live Comfortably in the 50 Biggest Cities | GOBankingRates

Want to live in Atlanta, like Bloomberg suggested last week? GoBankingRates says you’ll need to earn at least $60,285 to live a comfortable life, which they define as follows:

50 percent for necessities: $30,143

30 percent for discretionary spending: $18,086

20 percent for savings: $12,057

I’m guessing savings includes “savings plus retirement,” because I don’t see a line on their budget for IRA or 401(k)/403(b) contributions. This income distribution is also designed for a single person with no dependents, so it’s not applicable to everyone.

But okay, it’s good to know that a single person can do well in Atlanta if they earn around $60K. If there are two of you earning around $60K each, you’ll be twice as comfortable! (That’s how it works, right?)

What if you want to follow Bloomberg’s advice and spend three years living in Atlanta, saving up for a down payment? Recent HSH data indicates you’ll need around $33,840 for a 20 percent down payment on an Atlanta home, which they claim is doable on a salary of $37,551.08. (I love the fact that they included those eight cents.)

The salary you must earn to buy a home in 27 metros

But I’m not sure how many years HSH expects you to save on that $37K income, because when you look at GoBankingRates’ figures, which presumes you can save a full 20 percent of your $60K salary (lucky you, no outstanding debt or obligations preventing you from saving), you’ll still take the full Bloomberg-advised three years to hit that $33K down payment.

GoBankingRates also notes that the median household income in Atlanta is $46,439, which means that sure, there will be single people earning over $60K, but you’ll have to do a lot better than the median to live that comfortable life and get that down payment saved in three years.

At this point, I’d love to hear from Billfolders in Atlanta about all of these income and savings assumptions to see if they’re realistic. If you don’t live in Atlanta but want to check both GoBankingRates and HSH for your city to see whether you currently earn enough to 1) live comfortably and 2) buy a home and then let us know whether those figures are in any way relevant to your own experience, I’d love to have that discussion too.

Because all of the advice I’m finding about income expectations and homebuying expectations is confusing at best and conflicting at worst—and it doesn’t help any of us decide whether we should stay where we are, move somewhere else, or accept that we may never be able to afford a home.

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