NEW YORK (TheStreet) — Young Americans who aspire to own their own homes should forget about high-paying jobs on Wall Street or in Silicon Valley and move to low-cost Akron or Scranton instead, a Zillow.com study finds.
"Markets like Scranton or Dayton or Buffalo just have more lower-priced homes available. You'll usually make a little less income, but these places are a lot cheaper to live in," Zillow economist Svenja Gudell says.
Experts predict the Millennial generation — young Americans who've come of age since the year 2000 — will soon surpass Baby Boomers and Generation X to become America's No. 1 home buyers.
Many 23- to 34-year-olds had to live with mom and dad during the Great Recession, but are beginning to land good jobs and buy or rent their own places as the economy improves.
Still, high home prices and hefty down payments in "hot" housing markets such as San Francisco or New York mean few young people can afford first homes there.
To see where younger workers can pay for housing, Zillow compared median Millennial incomes in America's 96 largest metro areas with how much local properties list for.
Researchers found the worst Millennial affordability in costly California and Hawaii, but the best combination of wages and prices in the Midwest's so-called "Rust Belt."
Gudell says young workers' wages aren't all that bad in the Midwest, while property values are usually low and there are plenty of starter homes. By contrast, investors in cities such as San Francisco have snapped up most of the inexpensive inventory and turned it into rentals, she says.
Sally Johnson, president of Ohio's Akron Cleveland Association of Realtors, says young professionals who move to Akron to work in area hospitals or the University of Akron's cutting-edge Polymer Training Center generally like what they find.
"Almost without exception, they're pleasantly surprised by what we have — not just the affordable housing, but also the parks, the culture and the excellent restaurants," says Johnson, an agent with Stouffer Realty.
True, the average Millennial probably won't find Scranton as sexy Silicon Valley.
But Gudell says those who see homeownership as important should consider such locales all the same. "You might get more money if you move to [Silicon Valley], but you probably won't make enough to afford places," she says.
Look below for a rundown of the five metro areas that Zillow found offer America's best housing affordability for Millennials. (Or, click here for a look at the worst U.S. markets for young buyers.)
Zillow ranked cities based on what fraction of Zillow.com listings young people in a given metro area could pay for using no more than 30% of income to cover their mortgage bills.
The firm calculated median Millennial wages using U.S. Labor Department data for households headed by 23- to 34-year-olds. (Millennials living with their parents didn't count.)
Researchers used Zillow's fourth-quarter 2014 for-sale listings for the analysis and assumed buyers would finance purchases with mortgages that carried 3.98% interest rates. "Median home values" refer to Zillow's estimate of a typical property's worth in a given locale as of April, including residences not actually up for sale.
Fifth-best market for Millennials: Scranton/Wilkes-Barre, Pa.
Share of housing stock they can afford: 85.2%
NBC sitcom The Office was set in Scranton, but housing affordability is no joke for Millennials there.
While the typical 23- to 34-year-old local has just $44,674 in annual household income — or 9.2% below the $49,176 big-city norm — that's good enough to afford properties that sell for as much as $249,229.
That's excellent given that median homes are worth just $107,300 in the Scranton area, which is some 120 miles northwest of New York City.
"Millennials' incomes aren't that much lower in Scranton than the U.S. median, but home values are a lot lower," Gudell says. "So the Millennials there are able to afford more house."
Fourth-best market for Millennials: Youngstown, Ohio
Share of housing stock they can afford: 85.3%
Ah, to be young in Youngstown!
True, Millennials in this Rust Belt community some 65 miles southeast of Cleveland make just $37,838 in median household income — the third-lowest amount for any major metro area.
But Zillow says that's enough to afford homes that cost as much as $208,549, not bad in a market where the median property is worth just $76,800.
"Millennial incomes are very much lower in Youngstown than average — but housing is cheaper, too," Gudell says.
Third-best market for Millennials: Buffalo, N.Y.
Share of housing stock they can afford: 85.5%
Young Buffalo residents love their bills — housing bills, that is.
Millennials' $49,396 median annual household income is $220 above the metro-area average, but the Queen City's $123,700 typical home value is a stunning 30.7% below the large-community norm.
The typical Buffalo 23- to 34-year-old can afford homes that cost as much as $272,252, putting the vast majority of local housing stock within their reach in this community some 340 miles northwest of New York City.
"Incomes are doing alright for Millennials in Buffalo, and that means almost 86% of homes are acceptable [price-wise] to them," Gudell says.
Second-best market for Millennials: Dayton, Ohio
Share of housing stock they can afford: 85.9%
Dayton was the Wright brothers' hometown, but Millennials who move there will find that home prices are very down to earth.
While the metro area's 23- to 34-year-olds have a below-average $42,695 median household income, Dayton's $99,200 typical home value more than makes up for the difference.
The average Millennial can afford to buy properties priced as high as $235,318 in the region, which is some 70 miles southwest of Columbus.
"Dayton is a little lower on the income scale, but housing is also cheaper," Gudell says.
Best market for Millennials: Akron, Ohio
Share of housing stock they can afford: 89.6%
Millennials who move to the home of Goodyear and Firestone will never tire of Akron's housing affordability.
The Rubber City bounces to the top of Zillow's Millennial-affordability list thanks to a combination of below-average home prices and above-average wages for young workers.
The typical 23- to 34-year-old household pumps in $54,649 of annual income, which makes homes priced at $301,208 or less affordable to. That's good news given that the median property fetches just $119,900 in Akron, which is some 30 miles south of Cleveland.
"Akron's Millennials can afford nearly 90% of local homes, so they pretty much of have their pick of places," Gudell says.