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Saving for a down payment can take decades for minimum-wage workers

A study from BadCredit.org found that it can take more than 30 years for a minimum-wage worker to afford a down payment

The upfront cost of homeownership can be a difficult prospect even for households with higher income levels. A study released Wednesday by personal finance website BadCredit.org illustrates that, in some states, it’s next to impossible for minimum-wage workers.

To calculate the amount of time it takes minimum-wage workers to save for a down payment, the company analyzed Zillow‘s median values for single-family homes and condominiums from May 2023 through April 2024. It then correlated this data to the minimum wage in each state, according to the U.S. Department of Labor.

BadCredit.org assumed an 8% down payment — which is the typical amount for first-time buyers, according to the National Association of Realtors — along with saving 10% of total income while working 40 hours a week for 52 weeks per year.

The company found that at the national level, the average minimum-wage worker would need about 23 years to save for an 8% down payment. That’s based on the federal minimum wage of $7.25 per hour and a median home value of $349,000.

Chart courtesy of BadCredit.org

“The findings are a sobering reminder of the financial hurdles that low-income earners face in achieving the American Dream of homeownership,” Jon McDonald, senior editor at BadCredit.org, said in a news release. “While we’re seeing increases in minimum wage, such as the recent rise for California’s fast food workers, these steps are often insufficient to bridge the gap in high-cost housing markets.”

Naturally, the timeline varies from state to state. In Utah, it would take a minimum-wage earner 34.1 years to save for an 8% down payment. In 10 other states — including New Hampshire, Idaho and Hawaii — it takes at least 20 years to achieve the goal.

“If a person (earning the minimum wage) were to save 10% of their income starting at age 18, they’d be ready to pony up an 8% down payment by age 41,” the report explained. Comparatively, someone making the median income, which is roughly $68,000 in the U.S., could achieve the same milestone in just 5.1 years.”

Even at the low end of the spectrum for housing prices, it takes the better part of a decade for minimum-wage earners to afford a down payment. Illinois was deemed the least difficult state in this regard at 8.6 years, based on a minimum wage of $14 per year and a median home value of $250,979. West Virginia, Arkansas, Missouri and Ohio were next on the list in terms of shortest timelines.

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