Where Can Millennials Afford to Live?

It Might Be Time for Young Aspiring Homeowners to Consider a Move

By Jennifer Riner

Where Can Millennials Afford to Live?
September 28, 2015

Generation Y gets older, more 20- and 30-somethings are settling down and purchasing their starter homes. According to the Zillow Housing Confidence Index, 12.9 percent of millennials say they would like to buy a home this year, compared to only 12.1 percent of the population overall. Therefore, millennials are the most hopeful homebuyers in the country.

Although many want to, not every young person can afford to buy. Saving while renting has been tough on everyone – regardless of age – these past years with rents costing over 30 percent of the median U.S. income. Given the high rent burden plaguing most major metros, many millennials are even more motivated to enter into homeownership. The question remains: are homes affordable enough for lower-income earners like millennials to buy?

It might come as a surprise that the average millennial budget can afford more than 70 percent of homes on the market in the U.S. However, affordability varies greatly depending on location. For example, less than 60 percent of homes for sale in Boston are affordable for the average 23- to 34-year-old's income, assuming a 5 percent down payment and 30 percent of monthly income spent on a mortgage. Only 25 percent of homes on the market in Los Angeles and Honolulu are deemed affordable for millennials, further delaying young people’s West Coast and Hawaiian homeownership dreams. With more young companies infiltrating coastal cities, and more millennials moving to chase their career aspirations, young professionals struggle to find housing inventory that fits their income and price range.

Since mortgage rates are historically low, it might seem odd that so many homes are out of the price range for the younger generation. The problem lies within income level trends versus home value trends. Since 2000, income levels for the bottom third of U.S. workers have risen 15 percent, while home values have increased by 41 percent nationwide. In Los Angeles, an individual within the lowest-third income level would have to spend 85 percent of his or her monthly pay on an “inexpensive” property.

Cities Where Millennials Should Buy

On the other hand, there are a handful of mid-size cities that have the inventory within a millennial’s budget range. Check out the Midwest where 90 percent of homes for sale in Akron, Ohio, are affordable for millennials, again assuming 5 percent down and 30 percent of income spent on a monthly mortgage. In Minneapolis, 75 percent of listed homes are considered within price range. Generation Y buyers can also search for homes in St. Louis, where 85 percent of homes for sale are within their budgets.

If you are a young aspiring homeowner, struggling to find inventory based on your income level, it might be time to consider a move. Not only is for-sale housing unaffordable in large markets, renting is considered astronomical. With a lower income, housing costs are taking precedence over necessities like dental care needs.

Regardless of where you plan to live, you can determine how much home you can personally afford by visiting Zillow and begin your path toward homeownership. It might not be the right time to buy in your desired locale based on your income, but at least you will have an idea of how much to save before getting started.

  Conversation   |   34 Comments

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Steffanie | 09.28.15 @ 15:03
My nephew bought at a house at a very young age, so it is possible. What a great article to help others.
trish | 09.28.15 @ 15:04
While we probably could use a bigger home, with more space for our family, we love our neighborhood too much to leave! Sorry Millennials!
Erin | 09.28.15 @ 15:04
Jobs don't pay the same everywhere though, so someone with a particular job in Boston may be able to afford a house somewhere else with that income but may not make the same income in the other area.
Bobbie | 09.28.15 @ 15:04
Determining how much home one can afford applies to everyone.
Britt | 09.28.15 @ 15:06
As a Millennial, this was extremely useful.
Nancy | 09.28.15 @ 15:07
I live in California (inland) and if I had to buy the house that I own now, I couldn't afford it. I don't know how young people do it today.
Angie | 09.28.15 @ 15:08
I can understand why there is such an uptick in the millennials who are still living with their parents
Coryn | 09.28.15 @ 15:11
I am in the beginning processes of looking into buying a house, this is great info
Katie | 09.28.15 @ 15:12
My husband is younger then I am, and we are hoping that next year we could purchase our home. That would make him a home buyer at 25,
Heather | 09.28.15 @ 15:15
I don't know how they could afford a mortgage with all the college debt they've accumulated.
Daniel Dohlstrom | 09.28.15 @ 15:16
The housing market can be intimidating starting out great advice to add to ones knowledge
Kyle | 09.28.15 @ 15:16
Wonderful article.
Elaine | 09.28.15 @ 15:18
I think this applies to more than just this age bracket. Many are looking for a home but can't quite afford what is in the market. Some want a house so bad that they buy what they actually can't afford.
Ron | 09.28.15 @ 15:21
I know a few who are buying or recently bought homes, and they were in transitional neighborhoods. They bought to fix them up and sell in five years once prices are forecasted to peak.
Wanda Langley | 09.28.15 @ 15:22
My 25 year old granddaughter is looking now for her first home purchase. Great info!
Angie Taylor, Insurance Agent in Montevallo, AL | 09.28.15 @ 15:22
This works wonders
Beverly | 09.28.15 @ 15:25
IF people lowered their expectations on their first home they could probably afford a lot more than they thought, but most people want the best from the get-go. Owning a home is also a big responsibility and isn't for everyone, there is nothing wrong with renting, especially if purchasing a home isn't within your budget.
Sarah | 09.28.15 @ 15:31
Interesting... though not quite helpful to some. Affordable housing in another state is not always feasible since it requires a move away from the job that made it affordable in the first place.
Clarissa | 09.28.15 @ 15:31
I am a millennial and am tired of renting. I want to buy a house but it's difficult to understand how. This article is very useful and hits a lot of great points.
Christina | 09.28.15 @ 15:44
It's a good time for just about anyone to buy, with the interest rates still so low. Looking just outside urban areas is a really smart way to go - USDA loans are available with lower rates, and no money down :)
Sara | 09.28.15 @ 15:45
We could use a bigger home however, cannot afford it anytime soon. We bought at a very young age (both 20) so we have a while in this house.... hopefully
Leslie | 09.28.15 @ 15:46
This article is pointless. There's a reason there's more affordable homes in Akron than L.A., there's no jobs in Akron!! The article even points out that most companies are moving into un-affordable coastal cities. You really can't get ahead anymore. If you live close enough to a metro area where the jobs are, you're going to pay a ton to live there. If you live farther away, you might have lower housing costs, but then you have to consider what it costs to commute IF you can find a job in that area. This wasn't an informative article, it's an ad for Zillow.
Steven | 09.28.15 @ 15:55
Not sure I agree completely with this. It all depends on the economy of the area.
Crystal | 09.28.15 @ 16:06
Interesting article!
Owen | 09.28.15 @ 16:07
While possible it is difficult. Take advantage of FHA loans and USDA loans when possible.
Chelsey | 09.28.15 @ 16:08
My husband and I have been looking into buying a house. But the rents in our area as well as home prices have just sky rocketed. It makes it really hard to find a house to buy in a nice area that we want.
Tina | 09.28.15 @ 16:11
We were in our 20s when we bought our first home. With interest rates so low it make a big difference in the overall payment compared to our parents' starter homes.
Irene | 09.28.15 @ 16:16
I'd love to buy a house but it's just not in the cards
Selena Walls | 09.28.15 @ 16:20
Interesting information for first time home buyers.
Kathryn | 09.28.15 @ 16:39
Me and my fiancé just bought our first house at 18 and 23! It's definitely possible!
Alec | 09.28.15 @ 16:48
I never thought about how being a coastal state affects the housing market. I knew being a coastal city did but not state. It makes sense though. My fiancé and I will be in the market to buy at 26 here soon but his chosen profession will limit us to living in said coastal big cities we should avoid. If personally prefer to buy a doublewide out in the country a little ways!
Jackie | 09.28.15 @ 20:41
Great article.
Kailie | 09.29.15 @ 14:51
I will most likely be starting the process of looking for a home soon, so this was great info
Colt | 12.11.15 @ 16:46
Purchased my home in 2012 when I was 27 yrs old for 139.900 @ 3.75% using FHA. Now 3 years later, refinanced to a 15 yr Conv @ 3.5% and the home is worth $175,000. Payment is $150 higher now, but the amount of principal paid each month is 3x more than with the 30 year note. It can be done.
$commenter.renderDisplayableName() | 12.06.16 @ 22:03
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