California is home to many cities in which at least half of millennials cannot afford to rent a one-bedroom apartment, according to a recent analysis from Filterbuy.
Beyond inflationary pressures in staples such as food and gasoline, median rental prices increased 17.6% in 2021 and a total of 6.7% in the first seven months of 2022, according to Apartment List. Rent hikes are especially impacting the millennial cohort — defined by the Filterbuy analysis as those between 24 and 39 years old — which has the highest proportion of renters in comparison to other generations.
“The combination of rising rents and stagnant wages has been a challenge for Americans of all stripes, but certain groups have been more disadvantaged by this state of affairs than others,” Filterbuy explained. “Even well-off households are feeling pressure, as rising real estate costs price would-be buyers out and keep them competing for space in the rental market — and as they spend more on rent, they have a harder time saving for homeownership.”
The renter wage gap — the difference between median wages for millennial renters and median wages necessary to afford a one-bedroom rental without spending more than 30% of wages — is highest in the metropolitan area constituted by Los Angeles, Anaheim, and Long Beach. Although median wages are $36,649, the annual wage necessary for a one-bedroom apartment is $72,560 — pointing to a renter wage gap of 49.5%.
Because the median constitutes the middle of a data set, the data imply that over half of millennials are unable to afford one-bedroom apartments in the southern California cities.
“For millennials in some parts of the country, rental units fortunately remain relatively affordable,” Filterbuy continued. “The interior of the U.S. tends to have the most affordable locations, including 13 states where a typical millennial renter’s earnings exceed what is needed to afford the median one-bedroom unit. In contrast, most of the states where millennials have larger renter wage gaps are coastal states that tend to have higher housing costs due to limited supply, like California.”
Other cities in the Golden State — including San Diego, San Francisco, San Jose, and Riverside — rank among the least affordable for millennials, with respective renter wage gaps of 39.9%, 37.4%, 36.1%, and 34.5%. Similar disparities between income and rent exist in Miami, Orlando, New York City, Portland, and Boston.
Single family homes have soared in price since COVID and the lockdown-induced recession. In the first quarter of 2022, the median sale price of a home in the United States was $433,100, according to data from the Department of Housing and Urban Development, marking a 34% rise from $322,600 in the second quarter of 2020.
Home prices are expected to increase another 4% in 2023 — a relative slowdown from 17.8% in 2021 and 12.8% in 2022, according to a forecast from government-backed mortgage company Freddie Mac.
“The Federal Reserve’s action to help manage inflation has created significant volatility in mortgage rates and, by extension, the housing market,” Freddie Mac chief economist Sam Khater said in a press release last month. “Although house price appreciation will grow at a more moderate rate, home prices remain high relative to homebuyer incomes. Taken together, these factors are exacerbating affordability challenges and causing a slowdown in the housing market.”
Source: Dailywire
