Big city, small apartments to follow 30% housing guideline
Let’s be honest, many renters can only afford 333 square feet in LA
Dream of living in a big city in California while still being able to afford the occasional dinner out and entertainment, maybe a once-a-year vacation and socking away a few dollars for retirement?
Uh, think small. Very small. Like studio small.
California is an expensive place to call home, whether you are buying or renting. And if you’re going to follow the decades-old guideline of spending 30% or less on housing every month, you have few choices — find a roommate or look for a smaller (and more affordable) space.
So how much — uh, little — space are we talking about? It depends on the California city and your income. RENTCafe crunched data and determined how far you can squeeze the average income per city compared to the average rent and price per square foot. Trust me, it’s going to take the average-Californian living in coastal cities some serious squeezing.
Ditch the bookshelf (embrace ebooks), forget the coffee table and learn to use the words “comfy” and “quaint.”
Average paycheck gets you 333 square feet in LA
Los Angeles is the most cost- and space-constrained in the nation — and state, of course. The average wage-earner could only afford about 333 square feet and limit their spending to 30% of their monthly income in Los Angeles, about half the size of the average 792-square-foot apartment in the City of Angels. The figure is based on rent of $2,463 per month, according to RENTCafe.
San Diego finished in second-place in the state, and No. 10 in the U.S. at 552 square feet — about 330 square feet smaller than the average apartment in the state’s second-largest city.
Bankrate: How will you pay for the move? How much will it cost?
Now that moving expenses aren’t tax deductible for most families, how much will you have to pay and some tips on covering the cost via Bankrate.com.
Bay Area cities San Jose and San Francisco finished in third- and fourth-place in the state, and Nos. 12 and 15 nationwide. Both cities have incredibly high-priced rent for apartments — $2,706 and $3,607, respectively — but the average employee earns more than those in Los Angeles and San Diego.
Fresno (36 in U.S.), Sacramento (37) and Oakland (47) all require the average residents to live in much smaller spaces to follow the 30%-or-less guideline.
Where does space equal 30% spend on rent?
So, where does spending 30% of your paycheck on rent meet — or even exceed — the average apartment size in a California city? Think boots, Dwight Yoakam and oil. Yep, Bakersfield.
The average resident can spend 30% of her income and live in the average-sized 862-square-foot apartment in Bakersfield, where rent is about $992 per month.
Several other California cities are listed, and if housing costs are forcing you to look at other states (or you just need more space), the RENTCafe report offers a nifty way to compare and see how far your dollars will stretch.
Please remember that the data is based on average earnings and average apartment size and rents. NerdWallet has a nifty online salary calculator that allows you to compare your current salary and what you will need to earn in a comparable city.
Feature photo by Vladislav Gurfinkel/Shutterstock
How far spending 30% of income goes in …
- Los Angeles 333 square feet
- Oakland 340 square feet
- San Francisco 407
- Long Beach 443 square feet
- San Diego 552 square feet
- San Jose 551 square feet
- Riverside 589 square feet
- Sacramento 600 square feet
- Fresno 640 square feet
- Bakersfield 862 square feet
Go to Bakersfield, young man (and woman)
Millennials are buying … in Bakersfield.
The city is one of the hottest-selling markets for millennial buyers, thanks to affordable home prices compared to others in the state and nationwide.
Bakersfield is among the 10-strongest markets for millennials, joining the ranks of Denver, Salt Lake City, Seattle, Oklahoma City and Madison, Wis., according to the National Association of Realtors.
Bakersfield was the only California city that cracked the national list, with 67% of newcomers to the city being millennials, according to the report. The average millennial in Bakersfield earns $40,000 per year, making them able to buy 18% of the homes on the market, according to NAR.
Affordability make sense for some millennials
Affordability is a big concern for buyers, regardless of age. Only 28% of consumers could afford to buy a home in the Golden State during the fourth quarter, according to the California Association of Realtors. But Bakersfield, about 75 minutes north of downtown Los Angeles (without traffic) is more affordable at 53%, the highest percentage among the largest counties the state.
“While the rate of unemployment in Bakersfield is higher than it is nationwide, we’re seeing job growth there pick up at a strong pace,” says NAR chief economist Lawrence Yun. “Homebuilding in Bakersfield is rising, too. Many newcomers to San Francisco and Los Angeles do not stay for long because of unaffordability. Millennials moving to Bakersfield meanwhile are looking to take advantage of conditions toward homeownership.”
Kern County’s jobless rate was 10.1% in March 2019, much higher than the statewide average of 4.6%, according to the state Employment Development Department. NAR estimates job growth at 2.1% in the county during the past year. But the EDD reports anemic long-term job growth of 12,800 — or 3.8% — over the past five years in Kern County.
The county depends heavily on the energy and farming industries, and both sectors have been struggling since the Great Recession. In addition, farmers and oil companies are greatly affected by often-volatile pricing and geopolitical events.
A drop in prices and employment in these sectors have a ripple effect throughout the countywide economy, from professional services to retail. So, more affordable home prices come with an increased risk in employment in Bakersfield.
Make an offer, chances improve it will get accepted
California’s once red-hot housing market is definitely cooling off, with more home buyers having their first offers accepted by sellers.
Bidding wars and multiple offers have been common during the past several years, but have definitely slowed in recent months, according to Redfin.
The biggest change has been in San Jose, where 63% of first offers were accepted during the first quarter, compared to 25% a year ago — a 38 percentage point swing.
‘Buyers are more prepared to make strong offers’
In 2018, “very few homeowners were listing their homes for sale, and nearly everyone who did received multiple offers with few if any contingencies,” Redfin agent Stella Phua says in the Redfin blog. “Many buyers, especially first-timers or those who needed financing, were not quite ready to compete at that level. This year, buyers are more prepared to make strong offers, and there are more homes being listed, which is really helping.”
San Diego (16 percentage point change), Riverside (9 points) and Los Angeles (8 points) have also become more of a buyers’ market during the past year.
Only San Francisco remains very competitive, with 56% of first offers accepted in the first quarter, down slightly from 58% a year ago.
Nationally, first offers were accepted 56% of the time vs. 52% a year ago.