These Are the 13 Cities Where Millennials Can't Afford a Home (US)

[M II A II R II K]

These Are the 13 Cities Where Millennials Can't Afford a Home


June 8, 2015

By Victoria Stilwell & Wei Lu

Read More: http://www.bloomberg.com/news/articl...-afford-a-home

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Millennials have been priced out of some of the biggest U.S. cities, with residential real estate prices rising even as wage growth remains elusive. Bloomberg used data from the U.S. Census Bureau, Zillow Group Inc. and Bankrate.com to quantify how much more money millennials would need to earn each year to afford a home in the largest U.S. cities. The good news is that out of 50 metropolitan areas, 37 are actually affordable for the typical 18-34 year-old.

- The biggest disparities are on the West Coast. Take the three Californian hubs of San Francisco, San Jose (the heart of Silicon Valley), and Los Angeles (where a developer is trying to sell one of the biggest homes in U.S. history for a record $500 million). The typical young adult in those cities doesn't even make half of what's needed to afford a home. --- That makes places such as New York, where millennials have an earnings gap of just $6,550, seem relatively affordable. But remember that New York's metropolitan statistical region includes places that are outside of the high-priced housing market in and around Manhattan, where $374,350 (the median home value for the metro area) wouldn't even buy you a kitchen.

- Almost 80 percent of New York's millennials reside in three counties: New York County, Queens County and Kings County, where Manhattan, Queens and Brooklyn respectively are located. Using the average median home value for those three boroughs ($749,596) and the 2015 estimated earnings for millennials living there ($49,193), the affordability gap comes out to a whopping $52,262. --- Furthermore, Bloomberg's calculations assume that millennials have already saved up the 20 percent they'd need for a down payment, which is a problem in itself. Families where the head of household was under 35 years old had a median net worth of $10,400 in 2013, according to the Federal Reserve's Survey of Consumer Finances.

- Many millennials "don't have the money for a down payment or can't afford to buy where they want to buy," said Mark Vitner, senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. "It's tougher to buy a home in the city."
That means millennials living in unaffordable markets will be forced to shell out money for ever-increasing rents, instead of building equity. --- Graduate school brought Dan Smart, 28, to New York almost three years ago. As he was finishing his degree, he wanted to buy property to "put down some roots and be established for a while," Smart said in an interview. High home prices in Manhattan, however, are making that dream a little more difficult, he said.

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[plinko]

*Scratching head trying to figure out how to afford a $924k home on $133k a year. Sure...if you have no car, no life, and no children.

Then again, this is about Millenials...

[YSL]

Was wondering why New York appears so affordable. Then got to this: median home values excludes co-ops, condominiums and only includes detached single family homes.

So basically the entire New York City is excluded from "NYC"? Helpful.

[Shawn]

Originally Posted by YSL

Was wondering why New York appears so affordable. Then got to this: median home values excludes co-ops, condominiums and only includes detached single family homes.

So basically the entire New York City is excluded from "NYC"? Helpful.

Plus, this is metro-wide, not just city proper. I read this a few days ago on Reddit and a major point about NYC that was being discussed (and is mentioned in Mark's article highlights): if you just look at where Millennials actually live in metro NYC, 80% are in Manhattan, Brooklyn, and Queens. And the wealth gap for these three counties is -$52,262. Ouch.

[Ryanrule]

yeah once my boomer age parents go senile, they go in a home and i get the cash.

boomers earned it.

[chrisvfr800i]

Originally Posted by Ryanrule

yeah once my boomer age parents go senile, they go in a home and i get the cash.

boomers earned it.

"They go in a home" isn't exactly free, you know. Guess where that money comes from.

[Leo the Dog]

Where's Honolulu? Probably between LA and SF?

Surprised Chicago is that affordable. I guess Chicagoland encompasses quite a huge area though...

[Centropolis]

i knew that denver was becoming pricey...i know teachers there with 350k mortgages...i think i'd move to pueblo before doing that.

[10023]

13 cities where the median millennial can't afford a home. Lots of people earn more than the median income... half of people, as a matter of fact.

[lio45]

Originally Posted by 10023

13 cities where the median millennial can't afford a home. Lots of people earn more than the median income... half of people, as a matter of fact.

Good point. And another very good point made just earlier was that this article only looks at detached SFHs.

The title would be more accurate if it was "These Are the 13 Cities Where Millennials Can't Afford a Detached SFH so They Have to Content Themselves With Owning Condos".

I think this title -- which really *is* the real title of the article; if one reads it without a title (including their methodology, obviously) and is asked to come up with a title for it, it's likely what one will come up with -- would come across as much less shocking and really no big news.

[sopas ej]

Originally Posted by 10023

13 cities where the median millennial can't afford a home. Lots of people earn more than the median income... half of people, as a matter of fact.

I didn't read the full article but I looked at the graphics; isn't it about how much more a Millennial needs to make to afford an average home mortgage in a given area? The one example in the graphic says "A typical San Diego millennial needs to earn an additional $36K per year to afford an average home mortgage."

[lio45]

Originally Posted by sopas ej

I didn't read the full article but I looked at the graphics; isn't it about how much more a Millennial needs to make to afford an average home mortgage in a given area?

Here's the last paragraph of the Bloomberg article where they disclose what they did:

(bold mine)

"Methodology: Fifty largest U.S. cities are ranked based on the monetary gap between the median earnings of millennials and the minimum earnings required to purchase a single family home for the given region. Home values, sourced from Zillow, are based on January to April 2015 monthly median values for detached single family homes within a given region. Millennials' earnings estimations are based on 2013 median earnings for workers ages 18 to 34 years old from the Census Bureau, assuming an escalation of 2 percent per year. The mortgage payment calculation assumed a standard 20 percent down payment and state-based monthly average of 30-year fixed rates in 2015, or jumbo rates if the home value was higher than $417,000. Minimum salary required was the inferred amount, assuming one-third of the pre-tax income goes to mortgage payment."



So, yes, you're correct, it's about what you need to earn to be able to barely make mortgage payments after 20% down -- not accounting for how you managed to amass that 20% -- for a 30-year fixed rate (~4%) on the median-priced detached SFH for the region.

Originally Posted by sopas ej

The one example in the graphic says "A typical San Diego millennial needs to earn an additional $36K per year to afford an average home mortgage."

With their methodology, it would have been more clear of them to say "A typical San Diego millennial needs to earn an additional $36K per year to afford a mortgage on the median detached SFH in San Diego in early 2015."



Which means that a typical San Diego millenial, in order to make ends meet, will have to settle for 1) buying a cheaper-than-median SFH, 2) buying a townhouse, 3) buying a condo, 4) continuing to rent.

[Gantz]

Originally Posted by Shawn

Plus, this is metro-wide, not just city proper. I read this a few days ago on Reddit and a major point about NYC that was being discussed (and is mentioned in Mark's article highlights): if you just look at where Millennials actually live in metro NYC, 80% are in Manhattan, Brooklyn, and Queens. And the wealth gap for these three counties is -$52,262. Ouch.

How can you even calculate wealth gap in those counties, when Manhattan's sample size in this study is 0, because houses in Manhattan don't even exist. SFH in Manhattan is not for sale, the mayor of the city lives there. Even if it was, the house is estimated to cost over $120 million. On the other hand, you can buy 1 bedroom condo apartment within NYC metro for $50k, and a 1,500 sq ft house for like $80k. You'll be over an hour away from the city, but its doable and those prices are included in the sample.

[fflint]

So this looks only at the median costs of a metropolitan area's detached single family homes, and only considers a single income.

Don't most people buy a home with someone else with whom they combine their income and buying power? And isn't there a preference among Millennials for close-in neighborhoods where condos and townhouses are more prevalent than in SFH-only suburbs?

As usual, the list starts to fall apart when we look a little closer.

[brickell]

But what about the places that millennials with this much money would actually want to live?

[10023]

Originally Posted by sopas ej

I didn't read the full article but I looked at the graphics; isn't it about how much more a Millennial needs to make to afford an average home mortgage in a given area? The one example in the graphic says "A typical San Diego millennial needs to earn an additional $36K per year to afford an average home mortgage."

Well then why would someone buying their first home need to afford the average home mortgage? Most people start at the bottom of the housing ladder and work their way up. There's a reason they're called "starter homes".

So really here's the thing: One, not everyone can or should own their home. Two, younger people buying their first home are generally going to buy (and only need) something smaller. So the more interesting question is whether millennials in the 70th or 80th percentile by income can afford a 20th or 30th percentile home as a first step on the housing ladder. And of course one has to include apartments.

[chris08876]

Young people need to use their 20's wisely, build a career, save money, and if they marry, do so wisely (wait and don't rush to have kids). Doing so will allow for an easier life in the Northeast.

Its really not that hard when you think about it, but thats what seperates the well off from the not so well off. Either your wise in life or not. Those who make bad choices will suffer and/or make life much harder than it has to be.

Starter homes are a good choice. Millennials don't need anything fancy yet. Best to save up; which is much easier when you don't have kids.

Also, investing in a cheaper home or even a condo in an area that has a history of prices rising is a great choice. Something besides renting. Buying helps to build your net worth. Doesn't even have to be pricey either, just sellable at the end.

[kool maudit]

ownership of a detached single family home in a large city should be a somewhat anomalous circumstance, provided the city is built in a reasonably urban fashion.

[glowrock]

Originally Posted by plinko

*Scratching head trying to figure out how to afford a $924k home on $133k a year. Sure...if you have no car, no life, and no children.

Then again, this is about Millenials...

Yes, no kids, no car, no life, no food, no anything but a house payment and utilities (no cable or phone, either!).

This is a USELESS list, one of the most useless lists I've ever seen!

Aaron (Glowrock)

[glowrock]

Originally Posted by chris08876

Young people need to use their 20's wisely, build a career, save money, and if they marry, do so wisely (wait and don't rush to have kids). Doing so will allow for an easier life in the Northeast.

Its really not that hard when you think about it, but thats what seperates the well off from the not so well off. Either your wise in life or not. Those who make bad choices will suffer and/or make life much harder than it has to be.

Starter homes are a good choice. Millennials don't need anything fancy yet. Best to save up; which is much easier when you don't have kids.

Also, investing in a cheaper home or even a condo in an area that has a history of prices rising is a great choice. Something besides renting. Buying helps to build your net worth. Doesn't even have to be pricey either, just sellable at the end.

Or, Chris08876, you end up graduating from college with a Geology degree during a massive bust in the industry, end up working for peanuts for years, end up in debt up to your eyeballs, declare bankruptcy, have nothing, then finally get into your career field around the age of 32 and being stuck in a massive hole for years to try to climb out of (with a year+ of being unemployed in the middle of that time).

Don't get me wrong, I'm not crying "Oh woe is me!" or anything like that, but I think it's absolutely ridiculous to assume that everything's going to be smooth sailing from the time you graduate college if only you happen to fall into a great job immediately. Layoff? Never happen! No, never!!!

Besides, what the hell is the point of metro area-wide studies? Even in Houston, $170k might be the median price for a home, but almost ALL of the homes under $200k are in the far-flung suburbs. Nothing even remotely close to that number near the central part of the city where it would ever be feasible (possible?) to do anything but drive to and from work. Oh let me correct that, maybe $200k can get you something that's falling apart in a high-crime neighborhood a few miles from downtown, but it would be the kind of place that would take a few decades for gentrification to begin, if you get my drift...

Aaron (Glowrock)