The number of "million-dollar cities" with home listing values exceeding an average of $1 million has tripled since 2020, according to recent Zillow data.
With the average price of a home up 19.6% last year, according to Zillow, 146 new "million-dollar cities" were added in 2021 — the most ever in>First-time buyers are getting priced out
Escalating home prices have made it even harder for first-time home buyers to afford property.
The median down payment for first-time buyers is 7% of the total cost of the home, according to a 2020 survey by the National Association of Realtors. That works out to a down payment of about $70,000 for an average home in a million-dollar city.
Considering that millennials, many of whom are buying homes for the first time, have average personal savings of $63,300 and often carry a hefty amount of student loan debt, many simply can't afford to cover down payment on a new home.
There are federal and state programs that offer incentives for first-time buyers, like Federal Housing Administration (FHA) loans, but they come with restrictions, like mandatory down payment insurance and a price ceiling of $647,200 in most markets.
These programs do offer what are known as "jumbo-sized" mortgage loans for markets with million-dollar homes, but they have stricter guidelines for borrowers, larger down payment requirements and sometimes higher interest rates, per the Washington Post. You can look up the FHA loan limit in your country using this list.
However, "the government programs are not enough," says Desh Weragoda, chief technology officer for mortgage lender MBANC. "Look at any open house — they're crazy crowded. The competition and demand is so high that even if you have government help, someone else might come in with 50% down."
While increased mortgage rates are expected to cool down the housing market somewhat, experts expect home prices to continue growing in 2022, although at a more modest rate compared to 2021.
