NEW YORK (TheStreet) — America's Millennials are finally starting to get their first "real" jobs as the economy recovers, but affording their first homes will be another story — especially in the five metro areas below.
Home-buying site Zillow.com found recently that while the typical 23- to 34-year-old makes enough to afford some 70% of residences in most major cities, far fewer properties are within their reach in locales with the hottest economies.
"San Francisco, Seattle, Denver — places that have a lot of job creation and that many Millennials want to move to — those are more iffy," Zillow economist Svenja Gudell says.
Experts say the struggle to afford a first home represents a major stumbling block for Millennials' transition into adulthood and the real estate sector's full recovery from the housing bust.
Gudell says young adults stuck living in their parents' basements have hurt the housing market and the broader economy by failing to generate demand that would have otherwise sparked fresh home construction.
The economist says things are improving nationwide, but that some cities where Millennials are finding the best jobs have the smallest selection of homes they can actually afford. Gudell says markets with strong job growth often have "a ton of housing demand, which is pushing prices higher."
For instance, Zillow found that while Millennials in California's booming San Jose/Silicon Valley market enjoy an incredible $102,287 median annual household income, more than 60% of local homes are nonetheless beyond their reach. That's because the typical residence there costs $873,600 — the highest median for any metro area in America.
"I hate to say it, but even if you make a quarter of a million dollars in this valley, that's chump change," says Craig Gorman, president of the Santa Clara County Association of Realtors and sales manager for San Jose's Intero Real Estate Services.
Gudell adds that many hot markets have less affordability because investors have snapped up lower-priced properties and turned them into rentals.
Read on to see which of America's 96 most-populous metro areas have the smallest share of homes affordable by Millennials making a typical local wage for their age.
Researchers ranked cities based on what fraction of Zillow listings young people in a given market could pay for using no more than 30% of income to cover monthly mortgage bills.
The firm calculated median Millennial pay using U.S. Labor Department data for households headed by 23- to 34-year-olds. (Millennials living with their parents weren't counted.) Researchers used Zillow's fourth-quarter 2014 property listings for their study and assumed that buyers would purchase places using mortgages carrying 3.98% interest rates.