following the money

Where The Wealth Is

The best cities for building wealth in 2016

by Claes Bell, CFA

Mr. Bell writes about banking, CDs, cars and a variety of other personal finance topics for Bankrate. Reprinted with permission. Visit

October 27, 2016 — San Francisco first started turning fortune-seekers into fortune-holders during the gold rush days of the 1840s, and the minting of millionaires continues in the city today amid the technology boom resonating out of nearby Silicon Valley.

San Francisco’s surging property values, healthy job market and soaring executive paychecks make it the best big city in America for building wealth, a new Bankrate study finds.

“I think there are a lot of attractive things about living in San Francisco, one of those things obviously being its booming economy for a lot of different people,” says Ashley Pellouchoud, a San Francisco attorney.

But don’t pack your bags for the City by the Bay just yet.

“I think certain demographics are drawn to San Francisco right now, and many other demographics are being pushed out because of prices,” Pellouchoud cautions.

Other cities near the top of our ranking may seem more accessible — places like Detroit, St. Louis and Minneapolis.

So how did so many cities that aren’t exactly known as millionaire factories make it to the top of our list?

The answer comes down to understanding how the average U.S. household builds wealth — and why that matters.

The Best Cities for Building Wealth

Rank — City — Savable Income — Homeownership Rate — Debt Burden

  1. San Francisco – $16,657 – 53% – $25,941
  2. Minneapolis – $6,557 – 68.6% – $26,877
  3. Washington, D.C. – $15,246 – 64.2% – $28,914
  4. St. Louis – $10,451 – 66.2% – $27,486
  5. Detroit – $12,513 – 71% – $23,610
  6. Seattle – $10,381 – 55.4% – $27,691
  7. Boston – $5,115 – 55.1% – $26,318
  8. Denver – $13,099 – 61.1% – $28,007
  9. Phoenix – $14,828 – 63.2% – $27,811
  10. Baltimore – $9,303 – 66.9% – $27,917
  11. Philadelphia – $9,714 – 65.2% – $26,822
  12. Chicago – $11,966 – 62.7% – $27,594
  13. New York – $11,981 – 49.5% – $25,687
  14. Dallas – $9,177 – 59.1% – $29,204
  15. San Diego – $2,692 – 52.1% – $26,266
  16. Los Angeles – $7,246 – 46.5% – $25,147
  17. Houston – $6,117 – 59.1% – $29,571
  18. Atlanta – $2,503 – 62.1% – $28,259
  19. Tampa, FL – $3,437 – 62.7% – $27,015
  20. Miami – $3,613* – 58% – $25,645
  21. San Bernardino, CA – $9,790 – 62.6%% – $27,682


*Analysis showed a negative average savable income for the Miami metro area. This may be attributable to the high population of retirees in the area. You might expect those who are retired to be spending more than their income as they spend through their retirement savings.

Wealth is a big deal

Ask most Americans what their annual income is, and there’s a good chance they’ll have an answer ready. But ask them about their net worth, and they may have to get back to you. Bankrate has a cool calculator to help you see what you’re worth.

If you have little wealth, then uncertainty about what will happen to your household -- to your kids, to yourself -- will actually put a drag on your own health.

Yes, adding up all your assets like stocks and home equity, and subtracting your liabilities, like mortgages and credit card debt, isn’t something most of us do very often. But despite the lack of attention it gets on a day-to-day basis, household wealth has a huge impact on our financial well-being, says Diana Elliott, a senior research associate at the Urban Institute.

“It’s the ability to transfer some wealth and security to the next generation, and also to invest in one’s self,” Elliott says. Those investments can include things like having money for a down payment to buy a house or finance your education. Wealth also can smooth out rough patches in your household income and expenses, Elliott says. “What if your car breaks down? Do you have some wealth where you can repair that car, where you can purchase a new one if you need to?” Elliott says. The stress of not having that cushion can have far-reaching implications that can even extend to your physical well-being, says Sheng Guo, an economics instructor and researcher at Florida International University.

“There’s this feedback loop from wealth to health,” Guo says. “If you have little wealth, then uncertainty about what will happen to your household — to your kids, to yourself — will actually put a drag on your own health.”

Factors of Influence
A number of factors influence how quickly and effectively a household can build its wealth, and many hinge on geography.

Take real estate. While there’s no doubt in a post-crisis world that housing has its risks, “a home is where most Americans hold their wealth, so it’s incredibly important for wealth-building,” says Elliott.

“Potential retirees count on home equity as a source of retirement money” and parents “will often tap into that home equity to help fund their children’s college aspirations” she says. Unfortunately, some of the cities we studied have homeownership rates south of 60%, often because scarce land and other issues have driven real estate prices so high they’re unaffordable for large swaths of the population. “There’s a big variation in the housing markets across the United States,” says FIU’s Guo.

Still, a home isn’t the only way to build wealth. With San Francisco’s homeownership rate at only 53%, nearly half the city’s residents don’t have access to building wealth through home equity. But their incomes are so much higher, on average, compared with people in other cities that they may have more left over each month to put into savings and investment.

“Some metropolitan areas have seen different rates of growth than others. A lot of that depends on the industries and what’s there to support the workers within that city,” says the Urban Institute’s Elliott. Countless factors influence household wealth-building, from “social capital” — basically a scientific term for the value of your social network — to the way decision-makers handle their money day-to-day.

We focused on some specific, significant factors that can be shaped by the area where you live.

Read the full story here.