That is like saying a black hole is "dark".

I live in Berkeley and was casually looking at prices yesterday. . . I didn't see much of anything below $800,000. Ridiculous.

Of course, it's beyond BART and a hellish commute to Berkeley by car.

If nobody could afford SF median housing, SF median house prices wouldn't exist. Obviously since exactly 50% of homes sell for above and 50% below that figure, 50% of buyers are capable of paying at least that much, QED. If they couldn't, how did the sales go through?

Now here in flyover country such prices are barely credible. In my neck of the woods that's a 6br/8ba 9000sq ft (admittedly rather tacky and overdone) mansion on 2.5 wooded acres in a prestige enclave, not a midpriced city house. I could no more afford it than I could fly. My houses is a bit above median for THIS area though. And that's the point for SF residents. The nominal price is not the issue for in-market transactions; only the differential price. So if you own a median house in SF, you can sell it and pay a bit more to get a median+ house at say 1.5MM but only have a very modest 150k mortgage, or buy a median- house, still insanely high on a national scale for say $1.2MM and get a six figure nest egg, even if you only make a modest income far below $268k in either case. That's how 50% of buyers demonstrably pay what supposedly only 10% can possibly afford to in theory.

The only people to whom these affordability indexes apply are first time buyers in that market. As long as such cities are geographically constrained and yet continue to attract/retain residents, first time buyers will have an insurmountable problem. It's typical for dwellers in such areas to smugly say that it's because everyone wants to live there and demand jacks up the prices, but this is obviously bunk. Far more people want to live in Houston for example (there are fences around neither city, so we can assume people live in each by choice), and yet prices are about 20% of SF levels because there are no geographical boundaries to expansion there. If we saw a Mumbai/Amsterdam style massive land reclamation project that allowed a million more houses to be built in what is now the Pacific, overall prices would decline. Absent that remote nigh-impossibility, SF residents will happily continue buying and selling houses to each other for fantastical sums that they theoretically can never afford to for the simple reason that they only need worry about differentials, while incoming residents absent multimillionaires will put up with tiny micro-apts or student style shared spaces for exactly as long as they consider the cultural amenities of the city to be worth those barely human living conditions.

A lot of SF and the outlying areas have historical districts where the tallest buildings are 3 stories. If you want real estate to go down, you have to allow a major construction boom.

I'm sure there will be fighting, and I don't blame the residents who live in a historical district. The fact is, most cities have maybe 1 side surrounded by water, or maybe none, and development can grow in all directions, but SF is limited. You can't build more land outwards, so you have to go up. Its the only thing that will ever fix the issue.

And as much as people may not want to hear it, maybe SF is unaffordable, and they should relocate somewhere else.

I lived there for 4 years and could not find one decent paying job. Employers in SF are cheap ass bastards. They think because it's SF, that they don't have to pay you.

around 900K in the Sunset district and other areas throughout the city. Some areas are even more expensive.

Let's assume they have 200K for a 20% down payment, that leaves a debt of 720K. That would amount to a mortgage payment at 3.7% of about 4197/month

Property Taxes would amount to about 10800/year.

plus your other expenses, food, energy, transportation, etc.

Yeah, 268K income seems about right.

That is why you need at least two people working, and they both have to be employed by a company like Google, at a level of at least software engineer:

http://www.payscale.com/research/US/Employer=Google,_Inc./Salary

It is impossible for most people, and rents our out of site also, unless you were grandfathered in by rent control.

When the fed starts to raise rates. SF will always be pricey

We always had the rule of a house being no more than 2.5 X annual income here in Florida to get a loan.

I make more than 268K/year but no way I could afford a $1.35 million dollar home even if someone wanted to loan me that much.

That's insane.

What you can afford on salary X is determined by the payments, not the asking price. With 20% down you'd be paying just under 5k a month for a 1.35MM house. That's under 25% of gross salary. At zero down it would be about $6200, still under the 30% of gross salary often seen as a limit.

At 7% interest you'd be paying $9k in the latter instance. The idea of 3 times salary or so dates back to interest rates of that level.

Its simple but not always good. Can somebody making 100k afford a 250k house at 3%.

Yes very easy.

What if the interest rate was 10%. Its a huge jump and likely unaffordable.

A better rule is 28/36. Mortgage debt is 28% off gross income, all debt is 36%

To afford a 1.35 million dollar house, one would have to make 369k according to my calculations. I estimated propery taxes at 30k which I assume is low. Some have said 28/36 is outdated and Ive seen numbers aa high as 42% thrown arround.

Even this oversimplifies things. Somebody rich can be frugal and spend the same on a car and food as somebody making 50k, and they have more diaposable income, and are better suited to break the rule.

It could also be that banks still believe rent will rise and there is thought to be no risk.

I bought a house in June last year and two banks approved me for twice what I was aaking. I did the math to find out what my payment would be and it was nowhere close to affordable. My thought was "I wouldnt lpan me thar much money.