Photo Credit: Ammentorp Photography / Alamy Stock Photo
In recent years, the U.S. has become a nation of renters, with more households renting now than at any point since 1965. Although homeownership has historically been part of the American Dream, the lack of affordable housing nationwide puts this goal out of reach for many people. A combination of stagnant wages relative to inflation, rising construction costs, and increased student loan debt have contributed to a housing affordability crisis, especially in heavily urbanized economic centers such as New York and San Francisco.
Blanca Torres, a Real Estate and Economic Development Reporter at San Francisco Business Times, attributes the affordable housing crisis to rapid job creation. Torres explained, “The affordability crisis is driven by cities not building enough housing in response to job growth, which disproportionately hurts the lowest paid workers who get priced out first.”
Among these low-paid workers are young people such as millennials, many of whom are overburdened with student loan debt and still in the junior ranks of their career. According to data from the American Community Survey, the average income for full-time workers ages 27-37 is $55,462, which is too low to afford a home in many metro areas.
According to Torres, “Many millennials can’t afford to buy a home until much later in life than previous generations—if they can at all. Millennials aren’t waiting to purchase homes for social reasons but because of economic reasons: homes are more expensive, home price increases have far outpaced wage increases, and the share of entry-level or starter homes is drying up in many markets.”
Despite these negative economic trends in the national housing market, there is some indication that things are looking up. Census data shows that after a long decline beginning in 2004, the homeownership rate for individuals under 35 is starting to rise. As of Q4 2018, 36.5 percent of Americans under the age of 35 own a home—up from a low of 34.1 percent in Q2 2016.
To find which cities are most affordable for first-time home buyers, Construction Coverage used data from Zillow, the American Community Survey, and the Bureau of Economic Analysis. Its researchers created a composite score based on home affordability, projected home value growth, and cost of living. See the Methodology section for a detailed breakdown of the data used in the score.
Construction Coverage looked only at metro areas in which data from Zillow were included. Metros were grouped by population into the following categories:
- Large metros: more than 1,000,000
- Midsize metros: 350,000 – 1,000,000
- Small metros: less than 350,000