The Detroit example
The Point2 study shows that Midwestern and Texan cities tend to offer something California and New York struggle to do: good home price-to-income ratios.
Take Detroit, Mich., which is the third city on the list of homebuying pockets for the young. The cost of a home there is around three times the amount of the average Gen Z salary — the lowest ratio of all the cities analyzed. For comparison, in Fremont, Calif. and San Diego, Calif., home prices are almost 23 times the average young person’s household income. Detroit also has one of the highest homeownership rates among Gen Zers at 16.7%
It's worth noting that the Motor City does have a high Gen Z unemployment rate, and Point2 data says 27% of homes were sold over the listing price, so the bidding wars are fierce.
What’s unique about Detroit is that it's a major city, but still affordable. Though it’s had its ups and downs, the city is growing and its economy is recovering.
A University of Michigan report said that employed Detroit residents’ annual wages increased from $26,600 in 2014 to nearly $39,200 in 2021 — a 47% hike. The researchers expect to see more wage growth in the next few years, as well as 4,300 additional jobs added to the local economy in 2024.
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Younger generations can’t buy homes
The National Association of Realtors (NAR) reported in 2023 that the median age for a home buyer is 35, the second oldest age since it started collecting this data in 1981.
This is mainly because of the high home prices. NAR reports that the median price of a home is $382,600. If you want to buy that home with the recommended 20% down payment, it will run you $76,520 — which is over $10,000 more than the salary of the average high school teacher in the U.S., according to the Bureau of Labor Statistics.
It’s gotten so hard for young people to buy homes, that some of them are taking creative approaches to purchasing, such as buying homes with multiple friends. But many have given up all together on ever owning a home — even rich young people.
So for the determined few, they may have to look outside of the youthful hubs of New York and Los Angeles.
So you want to buy a home
Saving for a home is hard for anyone at any age in any location. But if you’re disciplined, it becomes a greater possibility.
The first thing is that you need to ensure that you have enough money for a down payment. The median $80,000 down payment seems like a lot of money. But with consistent saving, you can get there quicker than a New York minute.
If you don’t know your monthly expenses, you’ll need to make a budget. Once you have those numbers down, you can see how much you have left over per month to put aside for a down payment.
Then, make sure to automate that amount to go into a separate account every month, so that you don’t spend it. This will ensure that you continuously save, even when you’re tempted not to. Plus, you won’t have to even think about it.
It’s best if this account is an investment one. Even a conservative index fund will help you reap the rewards of compound interest.
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