And before you can buy a house, you need to save enough to make the down payment. Cobbling together enough cash for that has become a major barrier for many, especially in places where 20 percent down can be almost $200,000.
A 20 percent deposit on the median priced home in the U.S. right now — selling for $192,500 — is $38,500, according to a recent Zillow report.
"Home values are increasing at such a pace that in order to save up for a down payment it takes almost two-thirds of your annual income at the national level. In a hot market like Seattle, it can take more than a full year's earnings," said Zillow's Skylar Olsen
Buyers in Los Angeles, San Jose and San Francisco, must come up with 182 percent of their average annual income to make that down payment, Zillow found. In San Jose, where the annual median annual income is $105,455, the down payment on the median $961,600 home is $192,320.
First-time buyers with no equity to rely on — about half of those in the market — need to get creative to scrape together that massive down payment.
"A lot of people have tapped into their 401(k) and a lot have sold stock," said Jon Hunter, vice president at John L. Scott Real Estate, with agents in Washington, Oregon and Idaho. "They're also borrowing from their parents. I've seen a lot of gifts from parents to children, especially for that first home."
Of course, there are loans with less than 20 percent down — as little as 3.5 percent down — but the interest rates are higher and buyers are required to pay costly private mortgage insurance (PMI).
In very competitive markets, like Seattleand Portland, potential buyers often have to offer significantly more than 20 percent down to win the bidding. So what about renting? That used to be a common strategy for saving up enough to buy. But with rents so high and increasing so rapidly, even some renters find it hard to save enough. Zillow reports that the median monthly rent in the U.S. is now $1,402. It's $3,470 in San Jose, $2,625 in Los Angeles, $2,443 in San Diego and $2,239 in Boston.