Why it takes years to save for a down payment

The cost of the American Dream
The cost of the American Dream

Saving for a down payment is often a major hurdle for wanna-be homeowners.

And for good reason: Putting 20% down costs two-thirds of the average household income, according to a new report from Zillow.

"It's a big number," said Aaron Terrazas, senior economist at Zillow. "Very few are saving for a down payment in one year, it's something they do over multiple years. And for renters who have been faced with rising rent and health care costs, it's very difficult to put away any money at all."

A median-priced home in the U.S. is $192,500, according to the report, which means buyers need to come up with $38,500 to put 20% down. And that figure doesn't include added expenses associated with home buying -- like an inspection and closing and moving costs.

Home prices have been rising throughout the country, largely because of strong demand for homes combined with a shortage of available homes for sale. In many markets, home prices rose much faster than incomes, putting homeownership out of reach for some buyers.

Calculate: How much house can you afford?

Home buyers in California, where home prices have exploded in the past few years, are feeling the pinch the most. For house hunters in San Jose, San Francisco and Los Angeles, saving a year's worth of income wouldn't cover a 20% down payment. They would need to save at least 180% of the average income in those cities.

"California is a particularly challenging market right now. That is why we have seen housing affordability surge to the forefront of public debate," noted Terrazas.

On the other end of the spectrum, buyers in Pittsburgh, Indianapolis and Kansas City only have to save 48% of their income for a down payment.

Related: Government-backed mortgages are about to get cheaper

But not all buyers have to put down 20% to secure a home loan. Some banks offer mortgages with low down payment options, and some FHA loans require as little as 3.5% down.

However, putting less than 20% down means a buyer probably won't get the lowest interest rate and could face paying a monthly mortgage insurance fee. Many experts forecast rates to rise this year.

The market has been particularly tough on first-time buyers recently, which is roughly half the market, according to Zillow. They can't rely on the equity of a home sale to help bolster their down payment savings, and they face stiff competition.

"Beyond the challenge of saving while rents are rising, inventory has been particularity tight ... and inventory in entry-level, cheaper homes is even tighter," said Terrazas.

Here are the cities where home buyers need to save the highest percentage of income to cover a 20% down payment:

Los Angeles, California
Median 20% down payment: $118,000
% of income needed: 182%

San Jose, California
Median 20% down payment: $192,320
Percent of income needed: 182%

San Francisco, California
Median 20% down payment: $164,920
% of income needed: 180%

San Diego, California
Median 20% down payment: $105,300
% of income needed: 152%

New York/Northern Jersey
Median 20% down payment: $80,100
% of income needed: 114%

Riverside, California
Median 20% down payment: $63,640
% of income needed: 111%

Sacramento, California
Median 20% down payment: $70,040
% of income needed: 108%

Portland, Oregon
Median 20% down payment: $70,360
% of income needed: 107%

Seattle, Washington
Median 20% down payment: $82,520
% of income needed: 106%

Boston, Massachusetts
Median 20% down payment: $81,680
% of income needed: 101%

Are you in the process of trying to save for a down payment? Have you had to cut back to help bolster your savings? Email us about it, and you might be featured in an upcoming story on CNNMoney.

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