Takes Dog Year (7) To Save For U.S. House, 22 In SJ Despite Dips

SAN JOSE, CA -- The latest Zillow housing study breaks down the average time to save for a house in the United States as equating to a dog year -- seven. But in the nine-county San Francisco Bay Area it would come as no surprise that it takes longer. Those prospects wanting to settle down in San Jose with the canine, cat and 2.4 kids need to stash away the income for a little over three dog years -- 21. That's if one only relies on savings, a pot that has slowly diminished with stagnant wages.

Even with a median household income running the highest in the metropolitan South Bay city at $118,061, homebuyers would need to be diligent to have the suggested 20 percent down on a home here worth $1.28 million as the median, according to the report released Tuesday here https://www.zillow.com/. It only take half that length of time two decades ago. To put it into perspective, household incomes would need to rise 93.3 percent to keep up with the growing housing demand and pricing.

San Francisco is close behind with homebuyers needing incomes to rise at that level. It takes a little over 18 years to save for a home there, opposed to consuming a decade in 1998. The same goes for the Los Angeles-Long Beach-Anaheim markets lumped together. It only took 8.7 years to pay for a down payment.

On the opposite ends of the scale, it takes a mere 4.8 years in Pittsburgh, Pa., to save enough. If you want to have your money go farther, St. Louis, Mo., and Detroit, Mich. are options. This about the same rate it took a homebuyer to save enough in the United States 20 years ago.

All this equates to a household stashing away 10 percent of disposable income each month.

"The simple fact that home values have far outpaced income growth, lengthening the time needed to save for a down payment, contributes to millennials' struggles to enter homeownership. Saving up for a down payment can be tough, especially when the cost of everyday life outpaces the money you put into the bank," Zillow Director of Economic Research and Outreach Sylar Olsen said. "Slower rent growth in recent months should create some more breathing space in renters' budgets, but rents remain high by historic standards."

Millennials' plights may pose as predictable to those who watch both the housing markets for buying and renting.

The generation's quest to have "experiences" equates to putting off home buying as millennials spend that disposable income on vacations and upper-echelon rentals, as Gustavo Gonzalez of Valley View Properties in San Jose has seen. He's both a property manager and real estate agent, so he's witnessed housing trends in both arenas.

For rentals, Gonzalez classifies the low-income rentals as the "salt-of-the-Earth" types that wait on us at diners and clean the sheets in hotels. The middle class is just what it implies -- those squeezed by inflating housing prices with flat wages as they try to retrain and retool themselves. The millennials -- who are driving the tech world in the Silicon Valley -- are going for the high life of the "corporate rentals."

"They are about the experience. They try to locate to the high rise close to public transportation, walk to go dance at a new club or eat at a nearby restaurant," Gonzalez said. Unfortunately, these rentals come at a price that delay home-buying along with putting off having children and even marrying right away.

Home buying trends often coincide with the rental market tendencies. And, the law of supply and demand runs deep in the housing world.

Of course, the home-buying market can be seasonal too. He expects a little hiccup going into November and December as many people put plans to buy on hold to focus on the family and the holidays. There's also an immediate tie-in with job growth too.

Gonzalez sees a very lopsided South Bay with a huge demand for housing trying to keep up with hundreds of jobs opening up in the tech world. Where is everybody going to go?

Gonzalez believes regulatory agencies and local governments will have to get more creative on what they build.

"Right now, they're building to keep up with the demand of yesterday. They need higher density housing. It's like they're building 20-story buildings when they need 80-story buildings," he said.

It's like trying to fix a machine with baling wire and bumble gum. The Band-aid solution is only "building us into a deeper hole" Gonzalez contends unless government does something drastic. He used Mexico City and Tokyo as examples of global cities with creative housing ideas. Residents there live on one floor while doing their laundry, eating and going to the gym on other floors.

Height may be the answer.

"We're not trying to go to Mars here," he said.

Currently, Gonzalez insists local government can't find enough people to visit the sites as required by departments that permit construction. Then, California with its environmental CEQA rules sometimes create stumbling blocks that hold up the projects. The financial institutions haven't always helped too, Gonzalez contends, as their rules have stiffened since being reprimanded in 2009 when the housing market crashed.

"We certainly don't want to go back to those days, but it's ludicrous to get a loan now. They want your first-born male child," he said.

Still, despite the ominous reality of time required to save for or afford shelter, a slight dip reported last week may provide a little relief for both homebuyers and renters. It was the first time in six years rentals in the United States experienced a drop. The median rent is $1,440 -- 0.2 lower than the year before. The median U.S. home is worth $220,100, up 7.6 percent from 2017. That price doesn't exist at all in the Bay Area.

"With slowing rents and home value growth, searching for a new home should be somewhat less competitive than it was a year ago, giving renters and buyers a bit of breathing room. Rents remain high by historic standards, but September's modest annual decline in rents should ease some of the pressure pushing higher-income renters to buy," Zillow Senior Economist Aaron Terrazas said.

Terrazas told Patch that prices are still high with double-digit appreciation. The fact remains, paying for shelter still commands 40 percent of the household income.

"It used to be 30 percent," he said.

The Association of Bay Area Governments reports the region's housing stock increased in 2017 by only 14,900 units, the vast majority of which are apartments or condominiums.

--Image via Shutterstock