- San Francisco residents needed a minimum qualifying annual income of $269,600 to afford to buy a home in the second quarter, according to a Paragon report.
- Just 13 percent of Bay Area households could afford to buy the median-priced house, not including condos.
- At $100,200 per year, Marin County held the highest median household income, but only 18 percent of households could afford to buy.
- Bay Area renters have a household median income approximately half that of homeowner incomes.
The median home price in San Francisco reached $1.375 million in the second quarter, good for six times the U.S. national median of $240,700, according to California Association of Realtors (CAR) data as reported by Paragon Real Estate Group.
Per Paragon’s semi-annual report, CAR data shows San Francisco residents needed a minimum qualifying annual income of $269,600 to put 20 percent down and afford a mortgage, taxes and insurance to a buy a home in the second quarter. However, San Francisco’s median income is drastically lower, at $84,160 per year.
Due to exceedingly high housing costs, only 13 percent of households could afford to buy a median-priced house, not including condos, the report says.
Compared to the rest of the country, where an estimated 57 percent of households can afford to buy a median-priced house, San Francisco affordability is outstandingly narrow. While the recession helped soften prices slightly, the market is mimicking pre-recession levels to a certain extent.
Bubble forming?
At the peak of the market between 2006 and 2007, fewer residents could afford to buy compared to now, according to the report. San Francisco affordability greatly improved during the recession, but plunged again when the economy revitalized.
While affordability was worse a decade ago, Paragon states most counties have higher home prices now. But how is it that the cost of homeownership is higher, yet affordability improved?
Since the recovery commenced, climbing household incomes and extremely low interest rates eased the path to homeownership. Homebuyers benefitted from a 44 percent interest rate drop between 2007 and 2016.
When considering median sales price, mortgage interest rates and median household income, Paragon says the all-time affordability low was 8 percent in the third quarter of 2007. Affordability in San Francisco was 5 percentage points higher in the second quarter of 2016 — not a huge gap, by any means, but slightly better.
Nevertheless, the vast majority of San Franciscans are far from Bay Area homeownership.
Technology, home prices and wages in the Bay Area
Prior to the tech industry boom, Marin County held the highest median price across the Bay Area. Now, given the rise in tech-related incomes and extreme wealth in Silicon Valley, San Francisco and San Mateo counties held the highest housing prices in the Bay Area, according to the report.
San Mateo’s median home price was slightly below San Francisco’s in the second quarter, at $1.33 million.
Marin County’s median sales price was $1.225 million, with only 18 percent of households able to afford to buy a home. Still, Marin held the highest median household income, at $100,200 per year
San Mateo’s median household income was no. 3, at $96,800, and only 14 percent of households could afford to buy a house, Paragon says.
While new millionaires might gravitate to Silicon Valley, less-populated Marin County holds the highest ratio of “1-percenters” than the rest of the Bay Area. These ultra-rich households fall in top 1 percent of the U.S. population based on annual income, earning anywhere above $500,000 per year.
Marin had a 7.5 percent rate of ultra-wealthy households, followed by San Mateo, at 6.2 percent.
Although Santa Clara County ranked no. 3 in top 1-percenters households, at 5.9 percent, the population is seven times larger than Marin and the biggest in the Bay Area. Santa Clara held the greatest number of top 1 percent households than any other county.
Generally, Bay Area renters have a household median income approximately half of homeowner incomes, according to the report. As a renter, saving for a pricey 20 percent down payment in San Francisco and later paying the estimated $6,740 monthly mortgage payment on a median-priced home remains a pipe dream for many.
