Buying a first home in Madison easier than elsewhere

Once you get past the high prices, the Madison market ranks well due to the high saving rate of young professionals.
Jason Busch, Online Editor,
Homebuying Panel

Young professionals looking to purchase their first home could do a lot worse that the Greater Madison area. Though home inventory remains limited and prices are high, according to a new report, Greater Madison is ideal because it’s among the markets where renters can save the fastest for a starter home.

With the American dream still on the line for millennial renters, RentCafe went on a quest to find the hottest areas where they can become first-time homebuyers in the shortest amount of time. After analyzing 174 U.S. metros, RentCafe identified some hidden gems where homeownership is possible in around 3 years. Madison made the cut, ranking ninth among the top 20 best metros in the U.S. where renters can save the fastest for their first home.

Among the highlights:

  • Homeownership in Greater Madison is attainable in 2 years and 6 months if renters start saving now. With all expenses set aside, a two-person family with a combined median income of around $89,899 can spare 21% of their yearly budget for a down payment.
  • While it takes more than a couple of years to save just enough for a down payment in this bustling metro, starter home prices in Madison are the fourth highest in the top 20, averaging $242,538. As a result, the down payment is also among the priciest — $48,508.
  • Alongside Madison, the only Wisconsin metro to secure a spot in the national ranking is Fond du Lac. By comparison, residents here can become homeowners in 2 years and 8 months, if they start saving 12% of their annual budget ($73,562).
  • At the state level, Milwaukee is another great choice for homeownership, especially if renters don’t mind waiting over 3 years to save enough money. With starter home prices at $151,459, a two-family household must put aside 11% of its yearly budget ($77,367) to cover the down payment.

Overall, the RentCafe report finds that saving for a down payment on a starter home and becoming a first-time homeowner in less than three years is possible — especially in the Midwest.

While 2021 was a challenging year for homebuyers who competed for scarce inventory and record prices, times are even harder for first-time buyers — most of whom are millennials and Gen Zers in the early stages of their careers and who have to save for years in order to afford a down payment on a home.

Specifically, coming up with 20% down for your first home can be difficult — even when applying popular saving methods such as the “50-30-20” — 50% to “needs,” 30% to “wants,” and 20% to your financial goals — which is easier in theory than in practice.

Using data from the U.S. Census Bureau, Economic Policy Institute, BLS, and Zillow to calculate the number of years it would take a two-person family to save for the down payment on a starter home, RentCafe determined there are 64 metro areas where an average two-person family can save for a 20% down payment on a starter home in less than 10 years. All in all, these areas make up 36% of the 174 metros analyzed. Moreover, in all of the top 20 metros, it would take three years or less to achieve the dream of homeownership. Notably, small- to mid-sized metros in the Midwest are the best for first-time homebuyers.

So, what did the report have to say about Madison, specifically?

Madison, Wisconsin

  • Time to save for a down payment: 2 years, 6 months
  • Median starter home price: $242,538
  • Down payment value: $48,508
  • Median income (two-person family): $89,899
  • Needs 64% / Wants 15% / Savings 21%

“Expensive houses — but a high savings rate of 21% — make this Wisconsin metro worth considering. In fact, Madison is said to be one of the most ‘quintessentially American cities’ and has a vibrant cultural life. The acclaimed University of Wisconsin–Madison is one of the top employers in the region. The metro is also steadily growing and attracting residents and professionals in the health care, information technology, and manufacturing industries.”

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