Housing Affordability in San Fran & Bay Area Plunges; Stocks, Interest Rates Could Trigger Epic Bust

Housing Affordability in San Francisco & Bay Area Plunges; Stocks, Interest Rates Could Trigger Epic Bust
by Wolf Richter • August 16, 2015


The median house price in San Francisco has jumped 103% since the first quarter 2012 to $1.35 million in July; the median condo price has jumped 74% to $1.125 million. These aren’t palaces; condos include 1-bedroom and smaller units!

And incomes in San Francisco, it turns out, haven’t soared in lockstep (the Census Bureau pegged the median household income at $75,604 in 2013 though it has risen since). A similar scenario has played out in other Bay Area counties. And thus housing affordability has plunged. “Housing crisis” – that’s what a lot of people call it.

The Housing Affordability Index (HAI) for the 2nd quarter, just released by the California Association of Realtors, shows that only the top 10% of households in San Francisco can afford to buy a median house, and this despite historically low mortgage rates!

By comparison, 30% of the households in California and 57% of the households in the US can afford to buy a median home. To be considered “affordable,” the mortgage payment, property taxes, and insurance costs can’t be more than 30% of household income. This chart from a new report by Paragon Real Estate shows the absurdity in the 9 Bay Area counties, compared to California and the US:



So how much household income does it take to be able to buy that median house in San Francisco? A chunk! The minimum qualifying income is $268,000 – almost six times as much the $45,000 it takes in the US overall. But household incomes are only about a third higher in San Francisco. Absurd? ..............(more)

http://wolfstreet.com/2015/08/16/housing-affordability-san-francisco-bay-area-plunges-stocks-interest-rates-to-trigger-epic-bust/