The West Coast may not be the ideal place for millennial renters.
California's Los Angeles-Long Beach-Anaheim metro area has the largest gap between the median wage earned by millennials and the median annual income needed to rent a one-bedroom apartment, according to a new analysis by Filterbuy. For this analysis, millennials are defined as renters between ages 24 and 39.
In that metro, millennial renters earn a median income of $36,649, according to Census data reported by Filterbuy. However, the median annual wage needed to afford a one-bedroom rental without spending more than 30% of earnings is $72,560, according to Filterbuy's calculations.
Since the median falls in the middle, that means about half of millennial renters earn more than that amount while half earn less. The same goes for apartments — about half of one-bedroom apartments are cheaper than the median and half are more expensive.
The West Coast dominates the list of places where the gap between how much millennial renters earn and the wage needed to afford a one-bedroom rental is the widest. Five out of the top eight spots are in California alone.
Here are the eight cities with the largest millennial renter wage gaps, ranked from the largest rent-to-income ratio to the smallest.
Unfortunately, the overall gap seems to be widening as the rate of rental price growth outpaces wage growth. "The median U.S. rent has grown by 25% since 2014, while the median hourly employee earnings in the U.S. has increased by only 6% over the same span," the report finds.
But despite soaring rent prices, homeownership seems to be out of reach for many millennials.
Nearly 25% of millennials believe they'll be "forever renters," according to preliminary data outlined in Apartment List's 2022 Millennial Homeownership Report.
Affordability plays a major role in that. About 77% of millennials who expect to rent long-term say it's because they can't afford to buy a home. Median home prices hit a record high of $413,800 in June, the National Association of Realtors reports. For comparison, the median home price was $363,100 in June 2021 and $294,400 in June 2020, according to NAR.
Rising student loan debt is also a factor. Nearly 50% of those between 23 and 31 say that student loan debt hinders their ability to save money to buy a home, an August Bankrate survey finds.
However, younger generations are beginning to consider homeownership less important to their overall financial success, compared to older generations.
Only about 34% of millennials place a high importance on home ownership, compared to 45% of baby boomers, according to Apartment List's 2022 survey on Generational Attitudes on Homeownership.