Millennials can’t seem to get a break. Heavy student loan payments and poor job prospects mean they don’t qualify for home loans. And to make matters worse, in cities where the jobs can be found, rental rates are shooting up.
A recent WSJ article shares the story of a 25-year-old project manager who moved to San Francisco from Los Angeles in 2012. In two years, his rent increased 24 percent!
The overall rental rates in the top three cities in the U.S. aren’t quite that high. Still, many cities have seen their rates climb significantly higher than the nationwide increase of 1 percent in the third quarter.
Three West Coast cities occupy the highest increases in rental rates in the nation: San Francisco sits at the top with a 6.4 percent rise in the past year, and San Jose and Seattle came in second and third, respectively, at 5.9 and 5.7 percent.
Ryan Severino, an economist with Reis, tells the WSJ this is “a landlord’s market.”
The rental rate increases are due, in large part, to extremely low vacancy rates. Even with an uptick in the construction of apartments (23.1 percent higher than last year), the vacancy rates have remained low.
In other words, low supply + high demand = higher prices. As always.
It’s no coincidence that San Francisco, Seattle, and San Jose are the three West Coast cities on Credit Donkey’s 2013 10 Best Cities for job growth – the same three cities with the highest rental rate increases. Their strong job markets make them obvious choices for young professionals.
Numbers gathered from the US Census Bureau suggest that fewer 18-to-34-year-olds are living with their parents, but that they’re also not forming their own households.
This leads us to make a wild guess about how millennials are paying the ever-increasing rents in those job-rich cities: