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San Francisco

Buyers need to make $400K for a Silicon Valley home, highest threshold in US

That annual income represents 272% of the average earnings in region, study finds

In Silicon Valley, Homebuyers Need to Make $400K a Year
(Getty)
By
May 2, 2024, 3:00 PM

Silicon Valley homebuyers need to make more than $400,000 a year to afford a median-priced home in the area — by far the highest threshold in the country — according to data from Clever Real Estate. San Francisco buyers need to make more than $300,000 for a home in the city, the second-highest income required to reach homeownership. 

Clever defined affordability as spending 28 percent or less of household income on housing costs after a 20 percent down payment. A Clever rep said the discount listing site chose 28 percent because it is the number lenders use to determine a borrower’s ability to pay a mortgage. 

For the study, the San Jose MSA includes San Benito and Santa Clara counties. The San Francisco MSA includes Alameda, Contra Costa, Marin, San Francisco, and San Mateo counties.

With those criteria, a buyer in the San Jose metro would have to make 272 percent more than the area’s median household income to afford a median-priced $1.45 million home. In the San Francisco metro, where prices, especially for condos, have come down from spring 2022 peaks, buyers would need to make 236 percent more than the median income to afford a $1.1 million home. 

It appears that the affordability gap has shrunk slightly in San Francisco since the peak, the Clever rep confirmed.

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Because some salaries are so high in the Bay Area, it is actually not the most unaffordable locale in the country. That prize went to Los Angeles, where a home buyer would have to make 284 percent of the area’s median income to afford the median-priced $900,000 home. San Diego was also in the top-five least affordable cities, with buyers required to make 239 percent of the median income to afford a median-priced $850,000 home.

Given how California cities topped the least affordable list, it should be no surprise that the state is the least affordable in the country. The median home in the state sells for about $800,000, which means a household needs to make over $220,000 to afford it, or 242 percent more than the median income of $91,000. 

A high affordability gap in a market can cause significant problems, according to the Clever rep, from driving up rental prices to gentrification and displacement. 

“With no return on investment when renting a home, the gap between those who can afford to buy and cannot will continue to increase,” the spokesperson said.

Only four states had home markets considered affordable by the Clever criteria: Iowa, Indiana, Ohio and West Virginia. Though Pennsylvania is not affordable overall, Pittsburgh was the most affordable city in the country. A buyer could make $10,000 less than the area median income of $70,000 and affordably buy the median-priced $200,000 home. 

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