The combination of softening rents and rising
wages have improved rental affordability for college grads
(NASDAQ: RDFN) — The typical recent college grad in the Bay Area
who wanted to live in a 2 bedroom apartment with a roommate last
year was rent burdened—meaning they’d need to spend over 30% of
their income on rent—but that’s no longer the case. That’s
according to a new report from Redfin (redfin.com), the
technology-powered real estate brokerage.
In San Jose, the typical recent college grad would now need to
spend 27.8% of their income to rent the median priced 2 bedroom
apartment, assuming they’re splitting rent evenly with a roommate.
That’s down from 30.9% in 2023. There are only two other places
among the 33 U.S. metropolitan areas Redfin analyzed that flipped
to affordable from unaffordable for college grads looking to live
with a roommate: San Francisco (26.9% from 31.4%) and Sacramento,
CA (27.8% from 30.6%).
Redfin analyzed apartment asking rents from Redfin.com and
Rent.com through July 2024, and estimated 2024 salaries for
employed college graduates aged 22-29 (“recent college grads”)
using U.S. Census Bureau data. We define an “affordable” rental as
one where the asking rent is no more than 30% of the estimated
income for recent college grads. An “unaffordable” listing is one
above the 30% cutoff, meaning recent college grads would be “rent
burdened.”
The Bay Area has the highest salaries for college grads in the
nation, and while it’s still one of the most expensive places to
rent in the U.S., rents are softening. The typical recent college
grad in San Jose makes an estimated $108,499—the highest among the
metros Redfin analyzed. And the median 2 bedroom asking rent in San
Jose fell 1.8% year over year, helping college grads become
unburdened by rent. The story is similar in San Francisco, which
has the second highest salary for recent grads ($84,388) and saw
one of the steepest declines in asking rents (-6.7%).
“A lot of college grads in the Bay Area are working high-paid
Silicon Valley tech jobs, which is why they can afford to live in
the most expensive place in America,” said Redfin Senior Economist
Sheharyar Bokhari. “But affordability remains a huge problem in the
Bay Area— which has one of the highest rates of homelessness in the
nation—in part because there is a major shortage of housing.”
The Typical Recent U.S. College Grad Can Afford Rent If They
Live With a Roommate, But Can’t If They Live Alone
The typical recent U.S. college grad would need to spend 20.6%
of their income to rent the $1,725 median priced 2 bedroom
apartment, assuming they’re splitting rent evenly with a roommate.
That’s down from 22.6% last year.
Affordability has also improved for college grads looking to
live alone. To rent the $1,495 median priced 0-1 bedroom apartment,
the typical recent grad would need to spend 35.7% of their income,
down from 39% in 2023.
“Rents are falling in many parts of the country at the same time
that wages are rising. That’s why college grads are less likely to
be rent burdened than they were last year,” Bokhari said. “But many
Americans, especially those without college degrees, are still
struggling to cover rent and are also grappling with increasing
utility costs.”
The median U.S. asking rent for 0-1 bedroom apartments fell 0.3%
year over year to $1,495 during the three months ending July 31,
while the median asking rent for 2 bedroom apartments fell 0.7% to
$1,725. Meanwhile, wages have climbed; the median salary for recent
college grads is an estimated $60,277, up 9% from $55,300 last
year.
America’s renter population is growing three times faster than
its homeowner population, in part because the affordability crunch
isn’t quite as severe in the rental market. Nearly two in five U.S.
renters don’t believe they’ll ever own a home, up from roughly
one-quarter in 2023, according to a recent Redfin-commissioned
survey.
In Austin, The Typical Recent College Grad Can Now Afford to
Live Alone
Austin, TX was the only metro Redfin analyzed that flipped to
affordable from unaffordable for recent college grads looking to
live on their own.
The typical recent college grad in Austin would need to spend
28.3% of their income to rent the median priced 0-1 bedroom
apartment, down from 35.2% last year, meaning the typical recent
grad is no longer rent burdened if they want to live alone.
That’s largely because rents have cooled rapidly in the Texas
capital; the median asking rent for 0-1 bedroom apartments in
Austin dropped 12.6% year over year during the three months ending
July 31—one of the biggest decreases in the nation.
Homebuying costs have also cooled, but not enough to make
starter homes affordable. A family in Austin needs to earn $117,781
to afford the median priced starter home, a separate Redfin report
found. That’s down 2.5% from a year ago, making it the only major
metro that saw a decline. Still, an Austin household earning the
local median income can’t afford a starter home.
"Students who graduate from university in Austin—or in parts of
the Midwest where rents have always been low—have an advantage
because they can typically afford rent in the same town where they
went to school," said Redfin Chief Economist Daryl Fairweather.
"But college grads in places like New York, Los Angeles and Boston
may have tougher decisions to make. While those places are home to
highly regarded universities, graduates will have a harder time
finding a local job that pays the rent. They can move to a
different city, but then they risk losing their social network and
professional connections from college."
These Are the Metros Where Rent Is Most Affordable for Recent
College Grads
In Cincinnati, the typical recent college grad would need to
spend 16.9% of their income to rent the median priced 2 bedroom
apartment, assuming they’re splitting rent evenly with a roommate.
That’s the lowest share among the metros Redfin analyzed. Next came
Houston (17.2%), Austin (17.2%), Detroit (17.3%) and Indianapolis
(18.5%).
On the other end of the spectrum, here are the six metros where
recent college grads with roommates are rent burdened: Los Angeles
(35.9%), New York (35.3%), San Diego (32.6%), Riverside, CA
(32.3%), Boston (31.7%) and Miami (31%).
The list of most affordable metros is similar for grads who want
to live alone, though there are only four metros where the typical
recent grad wouldn’t be rent burdened. In Houston, the typical
recent college graduate would need to spend 27% of their income to
rent the median priced 0-1 bedroom apartment—the lowest share among
the metros Redfin analyzed. It’s followed by Detroit (27.8%),
Austin (28.3%) and Cincinnati (29.9%).
The least affordable metro for solo grads is New York, where the
typical recent grad would need to spend 56.2% of their income to
rent the median priced 0-1 bedroom apartment—the highest share
among the metros Redfin analyzed. Next came four other metros in
expensive coastal states: Los Angeles (54.9%), Boston (54.8%),
Riverside (54.4%) and San Diego (53.7%).
To view the full report, including methodology and more
metro-level data please visit:
https://www.redfin.com/news/college-grad-rent-burden-2024
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate
company. We help people find a place to live with brokerage,
rentals, lending, title insurance, and renovations services. We run
the country's #1 real estate brokerage site. Our customers can save
thousands in fees while working with a top agent. Our home-buying
customers see homes first with on-demand tours, and our lending and
title services help them close quickly. Customers selling a home
can have our renovations crew fix it up to sell for top dollar. Our
rentals business empowers millions nationwide to find apartments
and houses for rent. Since launching in 2006, we've saved customers
more than $1.6 billion in commissions. We serve more than 100
markets across the U.S. and Canada and employ over 4,000
people.
Redfin’s subsidiaries and affiliated brands include: Bay Equity
Home Loans®, Rent.™, Apartment Guide®, Title Forward® and
WalkScore®.
For more information or to contact a local Redfin real estate
agent, visit www.redfin.com. To learn about housing market trends
and download data, visit the Redfin Data Center. To be added to
Redfin's press release distribution list, email press@redfin.com.
To view Redfin's press center, click here.
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version on businesswire.com: https://www.businesswire.com/news/home/20240905557310/en/
Contact Redfin Redfin Journalist Services: Kenneth Applewhaite
press@redfin.com
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