The real estate market in Silicon Valley is notoriously expensive. However, a new report from HSH.com shows how much a San Jose resident must earn to pay for a home.
According to the study, a San Jose buyer must earn $ 243,303 annually to meet the monthly mortgage payment of $ 5,600 in order to afford the principal, interest, tax, and insurance payments on a home at average price.
A typical San Jose family makes roughly half that amount.
“As we produce housing, it’s also about what cost we produce that housing,” said Noni Ramos, general manager of Housing Trust Silicon Valley, an advocacy group for affordable housing. “We need to realize that we have a range of people who have a range of income levels, and not every household will even come close to being able to buy anything in that area.”
That’s an award for San Jose locals like John De Guzman, a procurement specialist for a Silicon Valley tech company. De Guzman and his fiancee, a nurse, both work in the area. They had a head start in finding a single family home before getting married, but despite their combined income, they realized that buying a home would be difficult.
“We looked at a few houses. It was scary to look at the prices and see what we could afford, ”said De Guzman. “We only used Zillow for browsing, but the down payment and mortgage looked too much for what we want to pay monthly.”
Instead, they’ve considered moving to places like Tracy or Manteca, though the shuttle service may keep them an hour away from their workplaces.
The COVID-19 pandemic has exacerbated housing affordability issues, causing many people to leave their homes due to unemployment. This is despite the fact that the region has experienced a “glowing” market in recent months and demand is keeping prices for single-family homes high.
“This has resulted in increased prices, multiple bids, and homes selling above asking price,” said Doug Goss, realtor at Keller Williams Bay Area Estates and president of the Santa Clara County Association of Realtors. “Given the pandemic, it is surprising how well the real estate market has really recovered not only here but across the country.”
Goss estimates that 75% to 80% of the homes he has worked with in San Jose receive multiple offers, increasing the likelihood that homes will sell above the asking price. Single-family homes, he said, are more likely to sell above list price while condos are more likely to sell near their list price.
There are several reasons, Goss said, that prices in the region remain so high. First, the region’s position as the technology capital of the world means there are large numbers of residents who want to live close to where they work. That means that even with the exodus of big companies looking for cheaper land, people still want to live in Silicon Valley, which is keeping demand high.
Second, the supply of housing has not kept pace with demand, so there are more buyers than houses. Interest rates are also at historic lows. The 30-year fixed mortgage rate has fallen in all 50 of the largest metropolitan areas in the United States, according to the study. In San Jose, interest rates changed -0.27% in the most recent quarter.
The study used a 20% down payment, a 30-year fixed-rate mortgage, local property tax numbers, and the homeowner’s insurance costs to calculate house costs. The figures are based on data from the second quarter of 2020.
For comparison, the average domestic income needed to buy a home is $ 60,770 – roughly a quarter of the income needed in San Jose. In the cheapest metropolitan area, Pittsburgh, one only needs to earn around $ 33,000 a year, with the median home price being $ 177,250.
The average home price in San Jose is $ 1.4 million, according to the study.
The prices may be overwhelming to some potential buyers, but Helen Gardin, Real Estate Agent at Pulse Real Estate in San Jose, has some advice.
“You (homeowner) should watch out for their credit,” Gardin said. “And find a lender to help them and help them figure out what to pay off.”
She and Goss also recommended homebuyer assistance programs such as Empower Homebuyers.
However, according to Mathew Reed, spokesman for Silicon Valley At Home, a local advocacy group for affordable housing, the problem could be longer-term. He said the real estate market, which has far exceeded the median income of people in the region, is “unsustainable”.
“It’s not good for families and it’s not good for the economy,” Reed said.
For De Guzman, who also wants to take care of his parents, it is next to impossible to afford a life in San Jose – even with what they consider to be “well-paying jobs”.
“We can’t take a break and catch up,” he said.
Contact Lloyd Alaban at [email protected] or follow @lloydalaban on Twitter.