(WJBF) — The dream of buying a home is growing further and further out of reach for millennials due to low inventory and a widening gap between wages and the affordability of housing, including rentals.
Analysts believe the housing and rental market are starting to cool, but all of the data shows it may not be enough to make housing affordable enough for millennials, whether they rent or buy.
Stagnant Wages and Buying Power
Livable wages haven’t risen much in decades for most average Americans. Wages reportedly only grew six percent since 2014 according to the U.S. Bureau of Labor Statistics.
A Pew Research Center study, however, shows that the rich got richer while the poor remained poor. The top 90th percentile of Americans saw their wages increase while everyone else remained the same. Since 2000, those on top have seen their wages grow more than 15 percent, or making five times what a lower income American would make. Those on the bottom barely saw a three percent increase in their wages in 22 years.
The National Low Income Housing Coalition says that renters need to earn an average of $21.25 an hour to afford a modest one-bedroom apartment, which isn’t good news if you’re making anything less than that. Georgia’s bare minimum wage currently sits at $5.15 an hour and has for decades (though most employers are subject to the Federal Fair Labor Standards Act and the current federal minimum wage which is $7.25 an hour).
While wages for Americans are larger than they were 50 years ago, data shows the buying power has largely remained the same. So despite Americans making more money, the rising cost of everything for several decades has widened the gap in affordability, and now a dollar doesn’t stretch as far as it once did.
Rising Rents and Lack of Housing
While hourly wages have failed to keep up with rent, Zillow shows the median price for rentals has more than quadrupled since 2014. Data shows millennials are most affected by this.
Data compiled by Filterbuy shows that even before a recent skyrocket in rent prices, “the gap between what a typical rental costs and what the typical worker can afford based on their income has been growing.”
The COVID-19 pandemic was not kind to renters. In addition, rising costs and inflation as the nation tries to rebound from a shutdown at the beginning of the pandemic has priced millennial homebuyers further out of homeownership. Rising mortgage interest rates and lack of housing inventory has caused millennial renters to compete with families for rental units who can’t for one reason or another buy or afford to buy a home.
ApartmentList says that despite millennials being “the nation’s largest generation,” they have the lowest homeownership rate and the “pressure trickles down into the rental market.” The price of rent has gone up nearly 18 percent since the start of the pandemic, and the “rapid growth in rent prices is a key contributor to overall inflation.”
In 79 of the largest 100 cities in the U.S, rent costs are up month-over-month.
Unaffordable Housing and Factors
With homeownership out of reach for most millennials and Generation Z adults, studies show that homeownership is now less important to both generations than their predecessors.
A December 2021 survey from ApartmentList shows that only 34 percent of millennials considered homeownership important for their personal success, and Gen Z even less than that at 23 percent. This was compared to the 41 percent for Gen X, 45 percent for baby boomers, and 43 percent for the silent generation.
And affordability remains the biggest issue for millennials. ApartmentList found that more than 70 percent of millennials surveyed said they can’t afford to buy a home right now, and nearly 80 percent of those said that not being able to afford to buy a home will mean they will be renting forever.
The National Association of Realtors says the median home price in July 2022 was $403,800, up nearly 11 percent since the same time last year when the median price was $364,600 and has seen year-over-year increases every month since 2012.
Data also shows that millennials have the least amount of savings to afford a down payment on a home. More than two-thirds surveyed, or 66 percent, have no savings for a down payment. This was compared to only 16 percent who had more than $10,000 and only 18 percent who had less than $10,000.
Another factor, according to CNBC, that rising student loan debt can also be factored into millennials’ inability to afford homeownership because it directly affects their ability to save.
Unaffordable Cities and Metros
Some of the nation’s largest metropolitan areas had the largest gap in rent-to-income which makes it even more impossible for millennials to even afford to rent a 1-bedroom apartment.
CNBC found that eight areas were the least affordable for millennials, including Los Angeles, Miami, San Diego, Orlando, San Francisco, New York City, San Jose, and Riverside, California. The majority of cities where millennials are unable to afford rent are along the west coast and in coastal areas.
Other areas where there was a large renter wage gap include Nashville, Denver, Seattle, Sacramento, Tampa, Boston, and Portland.
Georgia and South Carolina
Despite a rise in rental prices, the millennial rent-to-income ratio in Georgia and South Carolina is still not terribly bad compared to other parts of the country.
The millennial renter wage gap is larger in Georgia than it is in South Carolina. The largest metro wage gap is in the Atlanta area, meanwhile Augusta is on the lower end of the scale.
We must preface, though, the chart below uses data from two years ago when the U.S. Census Bureau conducted the 2020 Census and released their 5-year estimates. It hasn’t taken into consideration inflation and rising rental costs since then.
Nearly 25 percent of millennials in Augusta in 2020 were renting with their median wage being $28,000. In order to afford a modest 1-bedroom apartment in Augusta in 2020, you would have only needed roughly $30,000 a year. The median price for a 1-bedroom apartment in Augusta in 2020 was $765.
Of course, the rising cost of rent and inflation means millennials need more than what is estimated in order to just afford a basic apartment here in Augusta. According to Rent.com, the average rent in Augusta has not surprisingly surpassed the five-year estimate put in place by the U.S. Census Bureau in 2020.
Currently as of August 2022, the average cost of a 1-bedroom apartment in Augusta is $1,022, up 8 percent since 2021. The rent in Augusta is anywhere between $969 for a studio and $1,249 for a 3-bedroom apartment on average.
But, as evident by historical data, it’s likely the median wage hasn’t increased much, if at all, in the last two years.