"This great mismatch is hurting middle class people who would like to be homeowners," said Nela Richardson, chief economist at the real estate brokerage Redfin.
Roughly 40 percent of households in New York, San Francisco, Seattle, parts of Connecticut and Colorado, and Washington, D.C., earn more than $100,000 annually, compared with just 22 percent nationwide, according to the Census Bureau.
Areas that do offer inexpensive housing across the Midwest's industrial corridor—Akron, Ohio, say, or Fort Wayne, Indiana—lack the same breadth of career possibilities.
This trend has likely helped hold back U.S. economic growth. Cities with the strongest job markets would grow even faster if more people could afford to live there, noted Jed Kolko, chief economist at the online real estate firm Trulia. The additional population would help spur further job growth, which, in turn, would strengthen the local economy and foster more middle-class jobs.
Two factors are getting in the way.
Tighter credit has made it harder to buy a home in the costliest areas with a down payment of under 10 percent.
Leading up to the recession, mortgages with no or low down payments reached destructive excesses. Yet first-time buyers who have stable incomes are struggling to afford homes without these options, noted Nela Richardson, chief economist at the real estate brokerage Redfin.
Second, construction is running well below its pace from a decade ago. The government reports that builders are on pace to construct 1.02 million homes this year—about half the pace that prevailed in the early 1970s, when the oldest baby boomers were beginning careers.
Young adults continue to stream into many of the top job-generating areas despite the daunting housing costs. Nearly 52 percent of people who moved to the Bay Area over the past 12 months were millennials, according to Zillow. Similarly high percentages exist in New York City, Seattle, Denver and Washington.
Nationally, home prices are generally three times the size of annual incomes. Yet that ratio ranges from 3.5-to-1 in Washington to 7.1-to-1 in San Francisco. The challenge of shifting from rentals to ownership has become more problematic, particularly as younger workers look to marry and raise children.