This One Financial Move Could Save Couples $900 a Month — But There’s a Big Commitment
Written by
Yaël Bizouati-Kennedy
Edited by
Susan Kim
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It’s no secret that the dream of homeownership has been out of reach for many Americans. Rising rates, lack of inventory, and high home prices have left many of them on the sidelines — and in turn, many are stuck with renting. Yet, according to a recent Realtor.com survey, 22% of U.S. renters hoping to buy a home in the next 12 months have been saving for this purchase for at least a year.
Now, a new Realtor.com report found that couples could save a substantial $900 a month — funds that could be put toward buying a home. But it comes with what some might see as a huge commitment — moving in together.
Indeed, the report noted that shedding one rent payment and splitting one rent can help expedite saving for a future home purchase, especially in large U.S. cities seeing near-record-high rents.
To put this in context, inflation has enormously affected shelter prices. In January, the prices for shelter increased 0.6% and was the largest inflation driver, while rent prices increased 0.4%, according to the Consumer Price Index (CPI) released Feb. 13.
“Cutting down on housing costs can be a great way to save extra money and shorten the distance between you and homeownership,” said Realtor.com economic research analyst Hannah Jones, noting that growing savings, even just a few hundred dollars a month can help renters afford a down payment faster.
In especially pricey metros, purchasing a home also tends to be relatively expensive, so combining households and splitting the rent can make home buying go from a dream to a real possibility, added Jones.
For instance, she said that in an area such as San Jose, Calif., where the median rent of a 0-2 bedroom unit is $3,200 per month, assuming each party is paying median rent, dropping one rental payment and splitting rent could save each renter as much as $1,600 per month.
In turn, this could be a big step up from the $500 or less that 44% of renters looking to buy this year say they’re currently saving each month. At this rate, assuming starting from no savings, saving for a 10% down payment on a median-priced U.S. home, or $41,000, would take almost seven years, according to Realtor.com.
“Renters in high-cost metros who are spending well above $1,000 per month stand to save significantly more money each month by splitting rent, shrinking the amount of time necessary to save for and purchase a home,” said Jones.
Lovebirds in these top 10 metros with the most expensive rent should take note:
- San Jose, Calif.: $3,199
- Boston, Mass.: $2,955
- San Francisco, Calif.: $2,836
- Los Angeles, Calif.: $2,826
- San Diego, Calif: $2,822
- New York, N.Y.: $2,817
- Miami, Fla.: $2,368
- Washington D.C.: $2,198
- Riverside, Calif.: $2,182
- Seattle, Wash.: $1,988
According to Jones, the priciest U.S. rental markets tend to be expensive metros overall, including San Jose, Boston, San Francisco, LA, and New York. What’s more, the high costs in these markets are not limited to rentals, as the overall housing market tends to be pricey as well. As a result, she said that renters who hope to own someday may feel pressure to get creative to save for a home purchase.
Jones said the California metros of San Jose, San Francisco, Los Angeles, San Diego and Riverside are among the top 10 large metros by median rent. While rent fell year-over-year in these areas in December, they are still among the highest-priced rental markets.
“Renters in these pricey California metros areas can save more than $1,000 per month by moving in with their partner,” she added. “Trading solo-living for a roommate is an effective strategy for accelerating savings for a home purchase.”
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