Can The Class Of 2018 Afford The Life In These Cities? | Neighborhoods.com

Commencement marks the apogee of academic achievement: the culmination of years of scholarly work, immersive study abroad programs, and absolutely no parties (right?). Now that the class of 2018 have donned their caps and gowns to have illustrious degrees conferred upon them, the real work starts.

Fortunately, the future looks promising for recent grads: although CNN noted the real wages for the class of 2018 are “virtually flat” after inflation, it’ll be easier for them to find a job in the first place. In April, the unemployment rate dropped to 3.9 percent—the first time that’s happened since 2000. There are more than 6 million job openings in the U.S. right now, and the numbers of people quitting their jobs—as in leaving for a better position—is at a record high. The economy is doling out jobs, but the housing market is a little different.

Forbes recently called the 2018 housing market a “good news/bad news story.” The good news was almost exclusively for sellers, who are benefiting from higher asking prices in ultra-competitive markets. For buyers? The article cited stats like less affordability, higher mortgage payments, and rising interest rates (translation: bad news). But with the class of 2018’s ability to find a job and earn a solid starting salary, they can make a good investment in their future by getting into homeownership early.

We’ve looked at the average starting salary in four major cities to see which neighborhoods might be affordable and appealing for recent college graduates. While new grads likely won’t be able to afford single-family homes, condos offer a gateway into homeownership at a more reasonable price point.

Here’s our methodology:

Using NerdWallet’s Affordability Calculator, we entered the starting salary for each city to help us determine how much a recent grad could afford for a traditional 30-year mortgage.
For the down payment, we went on the low end and calculated 20 percent of a recent grad’s salary (as opposed to 20 percent of the total loan) to provide a basic framework. Depending on the type of loan they secure, that number will likely need to increase, but it’s outlandish to expect a grad to put down, say, half of his or her salary right off the bat for a down payment.
We also selected that these hypothetical grads have good credit scores ranging from 690 to 719 points.
Here’s where things got a little more presumptuous: We listed their minimum monthly debt obligations at $0. Hopefully, they don’t have any student debt at all…but at least they’ve got a reprieve until they need to start paying it back.

Ready to see how they fared? Let’s start with notoriously pricey San Francisco. After that, we’ll run the numbers for Los Angeles, Chicago, and Dallas.

The City: San Francisco

View homes in San Francisco

The allure:

It’s beautiful, iconic, and a total tech hub, boasting the Bay Area and nearby suburb offices for companies like Salesforce, Adobe, Intuit, Dropbox, Uber, Twitter, Microsoft, Oracle, Apple, Tesla, and Google.