Strong economic growth has led to rising incomes for U.S. households in recent years, and nowhere have incomes risen faster than in West Coast metropolitan areas.
Household income growth was most significant in the Bay Area, Pacific Northwest and Southern California, according to the U.S. Census Bureau. Over the last five years, median household incomes have grown 17.5% nationwide to sit around $60,336 in 2017. In the top two metros, however, income growth doubled that rate.
The three Bay Area metros take the top spots for median household income growth from 2012 to 2017. In San Francisco, median household income grew by 44.1%. Oakland incomes grew by 33.2% and San Jose incomes grew by 30.2%. Seattle, Portland, San Diego, Nashville, Austin, Denver and Los Angeles take the next top spots, with income growth around 23% to 28%.
Important to note in the Bay Area and other pricey West Coast metros, income growth in the past five years is likely influenced by shifts in the make-up of households, as more affluent households arrive in these areas with high costs of living. Similarly, many of these high-priced areas are seeing more low-income households leave.
Median household income in dollars amongst the top cities for growth still varies widely, ranging from $119,035 in San Jose to $65,006 in Los Angeles. However, median incomes in each topped the nation’s overall ($60,336).
Alternatively, many major metros are seeing median household income levels rise more slowly than the national average. The slowest income growth in major metros is seen in San Antonio, where median household incomes grew only 10% from 2012 to 2017. Cleveland (11.7%), Baltimore (12.8%), Memphis (13.3%) and Washington, DC (13.6%) round out the bottom five metros for income growth over the last five years.
Philadelphia, Indianapolis, Fort Lauderdale, Milwaukee and Houston also ranked among the bottom 10, with grow rates at least 300 basis points below the nation’s. Median household incomes in the bottom 10 metros for growth range from $101,659 in DC to $52,745 in Cleveland. However, median household incomes landed below the national average in four of the bottom 10: Memphis, Cleveland, San Antonio and Fort Lauderdale.
Many Midwest cities, such as Columbus, Minneapolis and St. Louis, hover around the national median of 17.5% growth.
In terms of household income levels, San Jose, San Francisco and Washington, DC take the top spots for income, all with a median of more than $100,000. Metros that have the lowest median household incomes include Greensboro and Miami, both of which are just under $50,000.
It’s important to note that Census data include the entire population such as homeowners, renters, retirees, low-income households and others. So while the data does offer a broad look at the economic health of the metro, it falls short on determining housing affordability – especially for local apartment markets.
In most cases, incomes for market-rate apartment renters are higher than the norms for all households. For example, RealPage apartment lease transactions data show market-rate apartment renters in Los Angeles earning incomes about 50% higher than the median for all households in the metro. In turn, Los Angeles apartment renters spend about 26% of their incomes on rents.
In fact, examination of renters’ stated income levels on millions of individual lease transactions shows that market-level rent-to-income ratios range from 21% in Raleigh/Durham to 29% in Miami, with the 50 largest markets averaging 23%. Despite increasing rents in recent years, rising incomes have caused rent-to-income ratios to hold more or less equal over a seven-year period. That percentage rises in Class C and D apartments, where residents may spend as much as 31% of their salary on housing.
In terms of metros that have the highest rent-to-income ratios – that is to say, metros where households spend more of their income on housing – we see some of the same California cities where incomes are growing more steeply. Oakland, San Diego, Riverside/San Bernardino, Los Angeles and San Francisco residents all have higher rent-to-income ratios than the national average of 23%.
Markets where renters are spending the least on housing are generally less coastal and concentrated in the middle of the country. Raleigh/Durham, Pittsburgh, St. Louis, Cincinnati and Chicago have the lowest rent-to-income ratios of all major metros in the U.S.