Thinking of buying a home in the Bay Area? You’ll need to make at least $250,000 a year to comfortably afford it.
That’s by far the highest homebuyer salary necessary anywhere in the country, and more than triple the average required nationwide income of $75,000 a year, according to a recent report by mortgage data website HSH.com.
The Bay Area real estate market has long been among the most expensive in the world, and owning a home in the region has become out of reach for even more buyers during the pandemic.
Over the past two-plus years, home values in the Bay Area and across the country soared as house hunters — many untethered from the office by remote work and buoyed by historic-low interest rates — were locked in a mad scramble for homes, sometimes bidding hundreds of thousands of dollars over the asking price.
But with interest rates rising, more properties on the market and an increasingly uncertain economy, prices have begun to decline in recent months. Even so, homes aren’t necessarily becoming more affordable. In many cases it’s the opposite, with higher interest rates making it more expensive for buyers to take out mortgages.
As the Federal Reserve has raised the cost of borrowing this year in a bid to slow runaway inflation, mortgage rates have spiked accordingly to around 5% for both jumbo and conforming 30-year fixed home loans. While rates have dipped in recent weeks, they’re still well above the less than 3% charge during the depths of the pandemic.
“It’s fair to say that incomes are also rising, although not by enough to offset these significantly increased requirements,” the HSH.com report states.
In the San Jose-Sunnyvale-Santa Clara metro area, buyers need to make over $330,000 a year to afford a median single-family home price of $1.9 million, a whopping 29% increase in needed salary from last year, according to the report. But the median annual household income in the city of San Jose was only about $117,000 in 2020, according to census data.
When accounting for mortgage payments, property taxes and insurance, the average monthly cost of owning a home in the metro area comes to over $7,700.
For the San Francisco-Oakland-Berkeley metro, buyers need to make at least $250,000 a year to afford a median single-family home price of $1.4 million, a 20% salary increase. The median annual household income in the city of San Francisco was about $119,000 in 2020. The average cost of owning a home in the metro is $5,800 a month.
The report used data for the first three months of 2022, when interest rates were lower than they are currently, meaning the cost of homeownership may now be higher even as prices have begun to soften. The report’s salary requirements were determined by capping spending on housing costs at 28% of household income.
After San Jose and San Francisco, the metro areas with the highest needed homebuyer salaries include San Diego ($167,000), Los Angeles ($149,000), Seattle ($141,000), Boston ($130,000) and New York ($129,000).
During the pandemic, many Bay Area residents fled to more affordable locales where home prices are cheaper. The report found necessary homebuyer salaries in some of those areas are $115,000 in Austin, Texas; $109,000 in Portland, Oregon; $104,000 in Miami; and $84,000 in Las Vegas.
