At the place where favorable employment opportunities and reasonable cost of living converge lies an opportunity for young professionals to buy homes without totally compromising on lifestyle.
A new report from the National Association of Realtors (NAR) identified the best purchase markets for millennial homebuyers by evaluating job growth, population trends, income levels and housing conditions in the largest 100 metropolitan statistical areas nationwide.
The sweet spot for this demographic, according to the analysis, can be found in those middle-tier cities that address the major obstacles millennials face with affordability and savings. Therefore, the top 10 offer steady job growth and don’t require sky-high qualifying incomes to buy a house.
“Even with potentially higher incomes, prospective millennial homebuyers residing in some of the most expensive cities in the country face the onerous task of paying steep rents while trying to save for an adequate down payment,” said NAR Chief Economist Lawrence Yun in a press release.
“However, for those currently living in or looking to move to a more affordable part of the country, there are metro areas right now with solid job growth and that offer a smoother path to homeownership.”
Based on their above-average share of current millennial residents and recent movers, employment data and relatively low incomes needed to purchase a home, NAR found that the top home purchase markets for millennials currently are (listed alphabetically):
1. Austin, Texas
Cultural appeal: “Live Music Capital of the World,” “Silicon Hills” (high concentration of tech giants)
Qualifying income: $43,635
Median household income: $51,810
2. Charleston, South Carolina
Share of millennial movers: 24.5 percent
Qualifying income: $41,369
Median household income: $47,903
3. Denver
Share of millennial movers: 27.7 percent
Qualifying income: $56,234
Median household income: $50,923
4. Minneapolis
Share of millennial movers: 27.4 percent
Qualifying income: $38,087
Median household income: $55,066
5. Ogden, Utah
Share of millennial movers: 24.6 percent
Qualifying income: $29,005
Median household income: $54,608
“Ogden is a small metro area which has one of the best combinations of low home prices and a relatively high median household income,” the report noted. “In 2014, millennials who moved recently earned almost twice as much the qualifying income for first-time homebuyers in the area.”
6. Portland, Oregon
Share of millennial movers: 26.7 percent
Qualifying income: $51,847
Median household income: $44,792
“Among the major cities along the Pacific Coast, it is the most affordable metro market,” NAR wrote in the report.
7. Raleigh, North Carolina
Share of millennial movers: 25.7 percent
Qualifying income: $37,815
Median household income: $49,892
8. Salt Lake City
Share of millennial movers: 27.2 percent
Qualifying income: $43,345
Median household income: $51,930
9. Seattle
Share of millennial movers: 29.0 percent
Qualifying income: $64,645
Median household income: $64,294
10. Washington, D.C.
Share of millennial movers: 28.3 percent
Qualifying income: $69,576
Median household income: $69,874
“Since there was not a significant increase in home prices in the area in 2015, many millennials can afford to buy a home,” the report noted. “In 2014, among the 100 largest metro areas, Washington, D.C., was ranked sixth for highest median household income of millennials movers.”
An Inman news brief from April “Are DC millennials really able to afford homeownership?” estimated that based on the current savings rate in Washington D.C., it will take this demographic about 11.9 years to save up enough money for a down payment.
Other promising markets also received an honorable mention shout out from NAR, including:
- Boston
- Dallas
- Des Moines, Iowa
- Jacksonville, Florida
- Nashville, Tennessee
While California and New York saw a huge surge in millennials flock to major metros during the early stages of the economic recovery to land fancy jobs, the higher cost of living made it hard to purchase a home.
A 2016 study by Apartment List surveyed 30,000 renters and found that for 77 percent of millennials, affordability is the largest obstacle standing in the way of homeownership, compared to less than half who feel it’s mainly because they’re not ready for marriage or settling down.
The research posited two likely scenarios for what would happen if and when millennials realize they can’t afford to buy a home where they currently reside: they will relocate to more affordable cities or continue to delay homeownership along with marriage and having children.
Yun added in the NAR report: “An overwhelming majority of young renters recently said they eventually want to buy a home.
“As long as new and existing-home supply keeps up to meet demand and holds prices from rising too quickly, these identified areas are poised to lead the way in helping millennials realize their American Dream of becoming a homeowner.”
