Buyers need yearly income above $400K for a home in SF

The Bay Area has the most expensive housing costs in the nation, according to a recent Redfin report, with a $10,000-per-month mortgage payment for a median-priced San Francisco home.

Homebuyers need a household income of more than $400,000 a year in order to make that monster mortgage payment “affordable,” which Redfin defines as spending no more than 30 percent of income on housing. San Jose’s figures followed closely behind with the second-highest payments at more than $9,000 per month and an “affordability” income of over $300,000. Oakland buyers pay $6,200 a month for a median-priced home, which is higher than payments for median-priced homes in Los Angeles, New York City, San Diego, Seattle and Honolulu.

Redfin’s calculations assume a 5 percent down payment, which is less than what Bay Area home buyers are often able to put down, courtesy of their tech stock holdings. A higher down payment would bring down these monthly costs, but the report also leaves out insurance and property tax payments and those could add substantially to a buyer’s overall monthly expenditures.

Even with prices dropping throughout the Bay Area far faster than in the rest of the country, these October 2022 monthly payment figures mark a one-third increase from October 2021, when mortgage payments were about $3,000 less per month and income requirements for affordability about $100,000 lower.

Yet much of the nation saw larger drops in affordability over the last year, according to Redfin, in part because the Bay Area’s October median home prices of around $1.5 million for San Francisco, $1.4 million for San Jose and $935,000 for Oakland were just slightly above where they sat last year. Nationwide, markets with bigger price increases saw monthly payments go up more than 50 percent as mortgage rates have more than doubled, from an average of 3.1 percent in 2021 to nearly 7 percent in October 2022. Plus, home prices that skyrocketed during the pandemic have only just begun slowing in much of the country.

“From February 2020 (just before the pandemic started) to October 2022, the monthly payment for an American family buying the median-priced home increased by roughly 70 percent,” according to the report, and now requires a household income of more than $100,000 to be affordable. “Affordability challenges are a major reason why home sales have slowed so dramatically over the last few months.”

Homebuyers in many markets in South Florida needed income gains of 60 percent or more over the last year to afford a home in those areas. North Port in Southwest Florida had the highest-year-over-year jump in salary requirements in the country with a nearly three-quarters increase. It was also one of the areas with the most property damage caused by Hurricane Ian in late September, though Redfin’s report stated that it still remains to be seen if that storm damage will lead to price declines.

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