Prospective buyers in San Jose looking for a “starter home” with a 30-year mortgage at current rates need at least $300,000 in annual household income, more than any market in the nation.
The data from Redfin shows San Francisco as second-highest for income requirements, at $285,000 annually, the San Jose Mercury News reports. Oakland helped the Bay Area tint dominate the upper ranks of the list, placing fifth, with $194,000 needed.
The report is based on Redfin’s definition of a “starter home.” The online brokerage counts five sectors of the housing market based on median prices, with an upper 5 percent. In between the highest and lowest are three sectors of 30 percent each.
The analysis for the study considers homes priced between the 5th and 35th percentile, essentially ruling out the bottom 5 percent as candidates for flips and other outliers. It assumes a down payment of 3.5 percent — the minimum for a loan backed by the Federal Housing Administration — with the buyer figuring 30 percent household income to go toward housing costs.
The bar for annual income has risen over the past year in the nine-county Bay Area region, where higher mortgage rates have added to the costs of a home. The median sales price for a single-family house in the region was $1.3 million as of July, up 3.6 percent from a year earlier.
Prices have risen in part due to lack of inventory. That trend has hit the Bay Area particularly hard due to the prevalence of a “lock-in effect” that has homeowners staying in properties longer in order to keep loans taken during the era of rock-bottom interest rates that were the norm for more than a decade before the increase of the past two years.
“That low million-dollar range is almost nonexistent now,” Hamed Barakzoy, a real estate agent based in Pleasanton, told the Mercury News. “It can even be challenging to find that for a townhome.”
Some house hunters are pushing their search out to exurban markets such as San Joaquin County, where the median price is $1 million compared with $1.8 million in Santa Clara County, which counts San Jose as its most populous city.