Saving the down payment for the American dream — that first home — can be the biggest challenge for young renters.
Aug 11 22 – In the late 1960s and early 1970s, this writer resided in a one-bedroom apartment for five years with a wife and two young children. We gave the kids the room and slept in the dining room.
To receive reduced rent in the winter, we shoveled snow at corner 16-apartment (left) in Roscoe Village and serviced the coal boiler hopper.
In the summer, we mow the lawn and paint vacant units for the owner. Typically, we dined in our small apartment kitchen with spaghetti, chili, burgers, and roast. Maybe we ordered a $5 pizza once a week.
Of my weekly journalist salary of $160, it took five years to save $10,000 for our down payment.
In 1973, we purchased a modest three-bedroom, one-bathroom stucco bungalow (similar to the North Side bungalow on the right) with an unfinished attic in the Irving Park Villa neighborhood for about $28,000.
Monthly payments on the $18,000 mortgage at 7.6% interest from First Federal Savings & Loan were $175 per month.
How times have changed. Today, the majority of young people drink $5.75 Shaken Espresso lattes, dine regularly at restaurants such as Alinea, Boka, Parachute, and Girl & the Goat, buy luxury cars, and rack up credit card debt. .
Currently, only one in three apartment dwellers are willing to upgrade to a smaller rental unit in order to save money for their first home, according to a survey of 3,700 respondents by RentCafe, a website national apartment search.
By forgoing the space of a bedroom, renters nationwide can save an average of $3,735 per year. With that in mind, RentCafe analyzed 200 cities to see where apartment renters could save the fastest for a down payment on a first home.
Surprisingly, Chicago is ranked number four in RentCafe’s Top 50 list, despite having some of the most compact apartments in the country.
Here are the highlights of the RentCafe survey:
• For renters who can sacrifice space, giving up a single room in Chicago will help them set aside $8,916 a year for down payment on a house. This is the third highest annual saving in RentCafe’s Top 50 list.
• In theory, putting that much money aside, it will only take renters two years and three months to save $20,185 for a 10% down payment on the typical starter home priced at $201,848 in the Windy City.
• According to RentCafe, Chicago apartments are among the smallest in the country, so compromising on space can be a challenge for many.
However, for thrifty renters who choose to reside in a one-bedroom unit — instead of a more expensive two-bedroom layout — to save for a down payment, it’s worth a try.
• Suburban Chicago renters residing in Des Plaines can save about $3,000 per year if they upgrade to a smaller apartment. With starting home prices in Des Plaines of $232,773, it would take them more than seven years to become homeowners, RentCafe noted.
• In the far northwest suburb of Schaumburg, tenants will need more than eight years to save for a first home as they will only save $2,604 a year by downsizing.
• In uptown New York, where starting home prices average $531,117, it would take a thrifty tenant with a great job two years and seven months to save $53,112 on a 10% down payment , according to RentCafe.
Home loan rates fall to 4.99%
On August 4, 30-year fixed interest rates on benchmark home loans fell to 4.99% from 5.30% a week earlier, Freddie Mac’s reported. Core Mortgage Market Survey. A year ago, 30-year loans averaged 2.77%.
Fifteen-year fixed-rate mortgages averaged 4.26% on Aug. 4, down from 4.58% a week earlier. A year ago, 15-year loans averaged 2.10%.
“Mortgage rates have remained volatile as inflationary pressures tussle with a sharp slowdown in economic growth,” he said. Sam Khater (right), Freddie Mac’s chief economist. “The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, especially as the Federal Reserve tries to navigate the current economic environment.”
Freddie Mac’s survey focuses on conventional, conforming, fully amortized home purchase loans for borrowers who have put down 20% and have excellent credit.