The rental market nowadays is scorching hot and the dream of homeownership strays further away for many. Downsizing the amount of rental space, specifically bedrooms, could be one way to move the needle for some back toward the path to saving for a home.
A recent survey by RentCafe examines this idea further, finding that downsizing by one bedroom could help renters save an average of $3,735 per year. To take things a step further, the survey analyzed 200 U.S. cities to determine the top 50 where it would take renters 2 to 5 years to save 10% for a starter house, by using this method.
Here are some of the survey highlights:
One in three renters would be willing to trade a little apartment space for a higher chance at ownership. This would allow them to save roughly $3,735 on average, per year. These amounts, as well as home prices, differ from city to city, and as a result, saving for a down payment might be faster in some places compared to others.
Dayton Ohio, Philadelphia Pennsylvania, and Jackson Mississippi lead the top 50 cities where it's possible to save in less than 5 years.
In Dayton, downsizing by one bedroom lets renters save 10% for a starter home in the area in just 1 year and 9 months. In Philly, it takes 1 year and 10 months, while in Jackson it takes 2 years.
Chicago, Illinois takes the honorable mention, being the fourth city where renters can save by downsizing, as it takes 2 years and 3 months to reach the goal here.
New York City stands out as one of the few big cities where downsizing can help renters save a considerable amount. Giving up one bedroom here lets you save over $20,000 a year, which in turn can be set aside for a 10% down payment over 2 years and 7 months. However, giving up space might be harder for renters in New York than for renters in other cities with more generous apartments.
“In a white-hot housing market, renters who are dreaming of their first home must adapt and compromise on one front or another. And, when saving becomes tricky, one way to put aside money for a first home is to give up a little bit of space. We found that 36% of renters were willing to use this method in order to afford their first home,” writes Laura Pop-Badiu, author of the report and creative writer at RentCafe.
“Notably, it didn’t matter whether renters were downsizing from a three-bedroom to a two-bedroom apartment, opting for a one-bedroom instead of a two-bedroom apartment, or going for a studio rather than a one-bedroom rental. The yearly savings from all of these scenarios helped us calculate the amount of time one would need to save for a 10% down payment on a starter home in the same city.”
View the full report, with the complete list of the 50 cities where downsizing allows renters to save for a down payment in a reasonable amount of time, here.
