10 Cities Where Young People Can’t Afford to Buy a Home

House key

Buying a home | Source: iStock

Home ownership is one of the original rites of passage for young adults. You swap a rent check for a mortgage payment, and start building equity on your home. It not only helps individuals build wealth, but it boosts the Unites States’ economy. But there’s a drop nationwide of young home buyers — millennials between the ages of 18 and 34 aren’t purchasing the same amount of homes that older generations have before them. The home ownership rate is in decline across all age groups, and millennials in particular have decreased home purchases by 7.3% over the last decade.

An analysis from Bloomberg might explain part of the reason that younger people aren’t looking to find their own home. In many cities that young workers are drawn to, they’re out-priced by the housing market and don’t earn enough to make up the difference. In some cases it’s a matter of a few thousand dollars, so it’s possible that gap could be closed. In other cases, however, the gap between earnings and mortgage affordability is at least 50% of their paycheck. It’s hard to believe that raises will happen quickly enough to get people into new homes at that rate.

Conventional wisdom says it makes sense to attempt to buy a home instead of rent, whenever possible. Rent prices are soaring across the nation, and smart financial decisions sometimes includes having a roommate for years after you receive a college diploma. But the reality is many Americans are under the impression that buying a home continues to be difficult, even several years after the official housing crisis. According to a recent survey by the MacArthur Foundation, 61% of Americans still believe the country is “in the middle” of the housing crisis or that “the worst is yet to come.”

Half of the public reported they made another financial sacrifice of some kind in the last three years to afford their housing payments, the foundation found, including stopping their retirement savings, getting another job or working longer hours, or accumulating credit card debt. This is especially true for millennials, with 67% of young respondents saying they’d done one or more of those things to keep a roof over their head.

Why millennials can’t buy a home

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Stagnating wages might be a part of the issue, as well as the persistence of part-time work when many people desire a full-time gig. Whatever the cause, it’s clear by looking at Bloomberg’s data that many cities that attract young workers are the same places where they’re immediately stuck paying rent each month — the cost of a mortgage is just too high. Another analysis by the Harvard Joint Center for Housing Studies found that many millennials can afford a mortgage in several metro areas. In many cases, however, the ones out-priced in the Bloomberg analysis are where a smaller percentage of millennials could afford a home in the Harvard study.

The Bloomberg study combined data from Zillow, the U.S. Census Bureau for income, and Bankrate.com to show millennial’s median income, the median home price, and the minimum salary millennials would need assuming that one-third of their income would go toward housing expenses. Both studies assumed a 30-year mortgage term, and Bloomberg assumed millennials would be able to afford the 20% down payment (which they acknowledged could be the first hurdle for many potential homebuyers). Here’s a look at 10 cities where millennials can’t afford a mortgage, as well as the percentage of those who actually might be able to make it work, per Harvard’s study.

10. Boston

Darren McCollester/Hulton Archive/Getty Images

Darren McCollester/Hulton Archive/Getty Images

  • Median home price: $379,975
  • Median millennial earnings: $46,348
  • Minimum salary required to afford a mortgage: $50,742
  • Gap: – $4,394
  • Share of renters who can afford to own: 36.6%

9. Washington, D.C.

Source: Thinkstock

Source: Thinkstock

  • Median home price: $402,800
  • Median millennial earnings: $49,294
  • Minimum salary required to afford a mortgage: $54,451
  • Gap: – $5,157
  • Share of renters who can afford to own: 44%

8. Riverside, Calif.

Source: iStock

Source: iStock

  • Median home price: $289,400
  • Median millennial earnings: $33,258
  • Minimum salary required to afford a mortgage: $38,647
  • Gap: – $5,389
  • Share of renters who can afford to own: 33.7%

7. Seattle

Dan Callister/Newsmakers

Dan Callister/Newsmakers

  • Median home price: $360,450
  • Median millennial earnings: $42,830
  • Minimum salary required to afford a mortgage: $48,608
  • Gap: – $5,778
  • Share of renters who can afford to own: 31.5%

6. New York

EMMANUEL DUNAND/AFP/Getty Images

Emmanuel Dunand/AFP/Getty Images

  • Median home price: $374,350
  • Median millennial earnings: $43,809
  • Minimum salary required to afford a mortgage: $50,359
  • Gap: – $6,550
  • Share of renters who can afford to own: 30.3%

5. Sacramento

Source: iStock

Source: iStock

  • Median home price: $341,050
  • Median millennial earnings: $38,908
  • Minimum salary required to afford a mortgage: $45,544
  • Gap: – $6,636
  • Share of renters who can afford to own: 39.8%

4. San Diego

San Diego at night

Source: iStock

  • Median home price: $509,800
  • Median millennial earnings: $37,439
  • Minimum salary required to afford a mortgage: $73,523
  • Gap: – $36,084
  • Share of renters who can afford to own: 22.6%

3. Los Angeles

FREDERIC J. BROWN/AFP/Getty Images

Frederic J. Brown/AFP/Getty Images

  • Median home price: $560,175
  • Median millennial earnings: $35,027
  • Minimum salary required to afford a mortgage: $80,788
  • Gap: – $45,761
  • Share of renters who can afford to own: 26.9%

2. San Francisco

Ezra Shaw/Getty Images

Ezra Shaw/Getty Images

  • Median home price: $764,925
  • Median millennial earnings: $49,342
  • Minimum salary required to afford a mortgage: $110,317
  • Gap: – $60,975
  • Share of renters who can afford to own: 17.1%

1. San Jose

Source: iStock

Source: iStock

  • Median home price: $924,825
  • Median millennial earnings: $53,215
  • Minimum salary required to afford a mortgage: $133,377
  • Gap: – $80,162
  • Share of renters who can afford to own: 17.7%

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