May 30, 2023 - Real Estate

Phoenix is a top 5 market for new college grads, Zillow says

Rent-to-salary ratios among Zillow's 2023 best markets for new college grads
Data: Zillow; Chart: Axios Visuals

We're trendy. We have lots of good jobs. And our pricey apartments remain less expensive than those in most other major metropolitan areas.

  • That was enough to land Phoenix on Zillow's new list of top markets for college grads.

State of play: Phoenix ranked fourth behind Colorado Springs, Colorado; Spokane, Washington; and Des Moines, Iowa.

Why it matters: Political, business and university leaders have spent the past decade trying to transform Phoenix into a place where university-educated people wanted to stay post-graduation.

Flashback: In 2011, an economist for the Board of Regents said more than half of graduates from Arizona universities left the state within two decades because there weren't career advancement opportunities.

Zoom in: The Great Recession hit metro Phoenix hard because the majority of our jobs were tied up in construction and other volatile industries. The state has tried to reconfigure its economy with more resilient and higher paying industries like advanced manufacturing and health care.

  • Those efforts appear to have paid off — Phoenix had more job openings for college graduates than any other market that Zillow studied.

The intrigue: Phoenix was one of only two major metros to make the list, with the other being Portland, Oregon.

  • Zillow senior economist Nicole Bachaud tells us more young people are opting for smaller markets with good jobs but a lower cost of living.

By the numbers: In Des Moines, for example, the typical new graduate would have to spend about 24% of their income on rent.

  • In Phoenix, 37% of their paychecks would go toward rent — the highest rent-to-income ratio of any market to make Zillow's ranking.

Of note: The rule of thumb is to spend no more than 30% of your income on housing to ensure you have enough to cover other expenses, Bachaud says.

Yes, but: That's become increasingly hard in most big markets, including Phoenix.

  • Nationally, the typical recent college graduate is spending 40% of their income on rent.

What they're saying: "I think it's important to understand that rent's expensive everywhere. … It's expensive in Phoenix, but not that much more so in Phoenix than in other markets," Bachaud says.

Be smart: COVID-era student loan forbearance will likely end this summer. Graduates should calculate their monthly debt payments before locking into an apartment to ensure they can afford it, Bachaud cautions.

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