Housing Market Drops As Millennials Cannot Afford to Buy Homes2 min read
Despite numerous initiatives to being millennials into the city via projects like the Regional Transportation District, Denver will add its name to the growing list of cities millennials can’t afford to live in.
Bloomberg Business recently analyzed income versus living expenses for millennials, and it points out a pretty huge issue. Millennials cannot afford to live in bigger cities or own homes, because wages have plateaued while the cost of living has substantially risen. Even smaller homes are difficult to afford for Millennial homebuyers.
Out of the top 13 cities where the average income does not match the cost of living, Denver ranks number 12. Most of the gaps occur in cities on the west coast, but plenty of unexpected cities — such as Denver and Portland — also made the list.
The calculations were made by using the U.S. Census Bureau, Zillow Group Inc. and Bankrate.com information. An earnings gap is generally defined as the difference between the median millennial salary and the median home price. Bloomberg used data from over 50 urban areas across America for their research. Of course, all of these figures also assume that millennials have already saved up the money for a down payment, which is usually around 20%.
The problem we face when it comes to growth in future years is that the median salary for those ages 18-34 living in Denver is $39,492 per year. Compare this to the median home price, which is $311,525. This means that the prospective homebuyer would need a yearly salary of $42,112, which equates to a $2,620 earnings gap.
However, Denver is only number 12 on the list. As you move up on the list, the gap only gets worse. The number one city on the list of worst cities for millennials is San Jose, California. In San Jose, there is are slim to absolutely no possibilities for millennials, as the earnings gap there is at a staggering $80,162. San Francisco and Los Angeles follow that up with $60,975 and $45,761 earning gaps respectively.
So what does this mean for millennials? Rather than building equity, they will be forced to pay rent, often living paycheck-to-paycheck. Many millennials are unable to move out of these cities due to job markets, so they’ll be forced to continue paying sky-high prices. As it is, we have seen the asking prices for homes fall by 0.7%, while rent went up by 5%. And that’s only within the last year.