Housing costs have risen sharply in the last decade, especially in expensive markets like New York City.
A new report from StreetEasy, a division of real estate marketplace Zillow, shows New Yorkers now pay 1.3 times more for housing in absolute terms than average Americans. To meet these high prices, 31 percent of New Yorkers must go over their initial budgets, whether buying or renting.
However, homeowners are more likely to overspend, with 37 percent exceeding their initial home budget, compared to 27 percent of renters.
According to the data, millennials are the generation most likely to go over their housing budget, with 45 percent opting for a more expensive home. Thirty percent of Gen Xers exceeded their housing budget, while only 19 percent of baby boomers did.
Big spending millennials
Millennials are also most likely of all the generations to consider buying a home right away. StreetEasy Senior Economist Grant Long says many young New Yorkers moved to the city to take advantage of its high salaries. They're finding those salaries aren't always high enough.
“Despite facing rising housing costs and budgeting constraints, aspirations of owning a home remain high in the city, particularly among millennials," Long said. "While New Yorkers’ widespread desire to remain in the city is encouraging, the region’s continued success depends on maintaining an adequate supply of affordable homes that fit the priorities of its growing workforce.”
New York is not the only expensive housing market to face this problem. In 2016 the Home Value Forecast, produced by Pro Teck Valuation Services, traced San Francisco's skyrocketing real estate values to its economic prosperity.
As it recovered from the Great Recession, the city created 500,000 new jobs, many of them paying big salaries. But the recession and resulting housing crash resulted in a plunge in home building activity in the region, where land is at a premium.
A half-million new jobs and almost no expansion in housing inventory resulted in a housing market where the average home lists for $1.2 million, and there is no shortage of buyers.
Focusing on the basics
With rising real estate values, New Yorkers looking to buy or rent a home are focusing on the basics, not the amenities. When asked to pick what they were looking for in a home, a majority said safety and access to public transportation were the most important features.
Most New Yorkers -- 57 percent -- would recommend life in the Big Apple, but those who own a home are most likely to feel that way. The survey found renters to be significantly more likely to say living in New York is unaffordable.