The future demand for housing centers on the largest demographic cohort the U.S. has ever seen – Millennials. There are an estimated 83.1 million millennials today from 18 to 34 years of age – more people than any group has ever had. While they are not a major home buying segment yet, it is a matter of just a few years before home buying becomes a primary goal and Millennials become the majority of new homeowners across the country.
To become a homebuyer today first requires a job – that is, a job that pays enough for the Millennial to afford the payments. Affordability, however, is not just whether or not you can afford the median priced home. Rather, in a unique and innovative twist by Credit Karma, they define affordability as the number of months it will take to fully pay off the loan when the owner spends 28 percent of their income on payments (the bank recommended limit).
To identify the most affordable cities for Millennials – based on the 28 percent of income going to loan payments among 18 to 34 year olds – Credit Karma examined more than six million Credit Karma members that had mortgages living in the 100 largest cities in America. They used the average size mortgage in each market and utilized market-specific median incomes among Millennials. Even though the typical loan fully amortizes over 360 months, they calculated the amortization period as if the buyer spent 28 percent of their income on mortgage payments.
So what are the most affordable markets – based on the number of months to amortize loans – for Millennials? And how long will it take then to fully amortize their loan spending 28 percent of their income? In addition to the data provided by Credit Karma, added also are the job growth rates for each of these markets for the 12 months ending September 2015. As pointed out by Credit Karma, there is an obvious overweighting of locales in the rust belt.
To read the entire analysis from Credit Karma click http://www.housingwire.com/articles/35547-here-are-the-top-10-affordable-cities-for-millennials-to-buy-a-home-now?eid=311692759&bid=1227631
This is an excellent approach by Credit Karma focusing on the number of months to amortize a loan that is applicable to all age groups in assessing a home purchase.
Ted