Buying an Orange County home would be “a bad idea” financially for most millennials, while commuting from the Inland Empire may be a very good path to homeownership for them, according to a new study by the online real estate site Trulia. That may not be news to home seekers, but the study underscores the degree to which it makes financial sense for 25- to 34-year-olds to look to the east.
The study, released Wednesday, finds that Orange County is the fifth least affordable housing market for millennial households among the nation’s 100 largest housing markets – less affordable than New York City. Los Angeles is the third least affordable market, and San Diego is seventh, according to the study. But while Riverside and San Bernardino counties together form the 21st least affordable housing markets, stretching to buy a home there can make sense when taking future wage growth into account.
In Orange County, that’s bad news not just for millennials but for the housing market as a whole. Experts say millennials are needed to fuel move-up buyer purchases down the road. To be considered affordable, the mortgage payment for a median-priced home – a home valued at the midpoint of all prices – must consume 31 percent or less of a homebuyer’s gross income. Trulia’s analysis applies only to 30-year fixed mortgages. Trulia’s report showed that a typical Orange County payment on a 30-year fixed mortgage consumes 57.4 percent of a millennial household’s income in the first year of the purchase. Given expected rates of income growth, that same payment won’t fall to 31 percent until year 17.
Source: Orange County Register