In “This Is What Happens When A Millennial Tries To Get A Job [6],” we highlighted 1) high youth unemployment (U-6 at nearly 14%) and 2) the failure of America’s university system to prepare new entrants for the job market, on the way to painting a rather grim picture for America’s newly-minted college graduates.
We’ve also been keen to emphasize the fact that the “strong” labor market is anything but, as wage growth is essentially non-existent and upside “surprises” benefit from the now ubiquitous “vanishing worker.” Given this, it’s no surprise that many of America’s best and brightest find themselves serving food and drinks after graduation even as they owe an average of $35,000 in student loans, debt which is curtailing homeownership — or at least delaying the process.
Given the above, it’s not surprising that in many large US cities, buying a home is simply out of the question for most millennials, even assuming they have saved up 20% for a down payment. Bloomberg has more [7]:
Millennials have been priced out of some of the biggest U.S. cities, with residential real estate prices rising even as wage growth remains elusive.
The good news is that out of 50 metropolitan areas, 37 are actually affordable for the typical 18-34 year-old.
The bad news is that the areas that often most appeal to young adults are also the ones where homeownership is the most out of reach..
Bloomberg's calculations assume that millennials have already saved up the 20 percent they'd need for a down payment, which is a problem in itself. Families where the head of household was under 35 years old had a median net worth of $10,400 in 2013, according to the Federal Reserve's Survey of Consumer Finances.
Many millennials "don't have the money for a down payment or can't afford to buy where they want to buy," said Mark Vitner, senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. "It's tougher to buy a home in the city."
That means millennials living in unaffordable markets will be forced to shell out money for ever-increasing rents, instead of building equity.
[8]
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We'll leave you with the following quote from Dan Smart, a 28-year old with a graduate degree who spoke to Bloomberg about what it's like for young professionals in New York:
"I'm making a good salary and I'm doing all these things that I'm supposed to be doing. But you're just not able to save enough to get to that number. Housing is so inflated."
