Talk about depressing!
The list starts with #23 – Salt Lake City. According to Business Insider, you need an income of $51,572 to afford a $282,100 (on average) house in Salt Lake City.
#20 – Reno, Nevada requires an income of $56,435
#13 – Denver / $69,763
#11 – Washington D.C. / $70,256
#8 – Seattle / $77,386
#6 – Los Angeles / $92,030
#3 is Orange County, California, where my wife grew up.
You’d have to be in the top 10% of all earners (making $136,234) to be able to afford a house in Orange County. Their average home prices are a whopping $745,234.
As expensive as that is, San Francisco and San Jose, California cost even more.
With numbers like that, is it any wonder why Millennials (those born in the 1980’s and 1990’s) rent apartments in such high numbers? This may be the first generation in some time to have it worse than their parents did.
Contrast the cost of buying a home with the income that the Millennials actually make. For that information, let’s look at another Business Insider article and its salary map:
It’s clear to see that, for Millennials, we have a home affordability problem in this country.
The Millennials are facing some significant headwinds. Consider these facts:
- The median income for 25 – 34 year olds in 2000 was $35,000. By 2014 that number had declined more than 10% to $31,000.
- Housing prices are up 80% – 100% in that same period.
- Millennials can’t afford the 20% down payment it takes to buy a home as 70% of them have less than $1,000 in savings.
- Millennials have the lowest credit scores of all generations averaging just 625. This falls well below the necessary FICO score to obtain most loans.
- Millennials are taking on more debt with the number of students borrowing for college rising by 66% between 2005 and 2012. And the size of that debt has risen 49% during that same period.
Relative to earlier generations, Millennials are struggling by making less money, incurring more debt, experiencing underemployment, facing lower income growth trajectories, and having a harder time saving money.
The deck is stacked against them and homeownership is largely outside of their reach.
As the largest generation in U.S. history is it any wonder why rental demand is so high? After all, when you don’t own, you rent and that affects the homeownership rate.
The Millennial’s lack of access to homeownership is just one of many demographic trends fueling massive rental demand. If you’d like to learn about the others, and see if apartment investing might be right for you; then download this free report:
To Your Wealth!
Dennis Bethel, M.D.