Map: What You Need to Earn to Afford a Median-Priced Home in Your County in California

In San Mateo County, homebuyers need to make an annual income of $511,000 to afford a median-priced home — the highest in the state, according to data released Thursday by the California Association of Realtors.

That eye-popping figure is being driven primarily by persistently high interest rates, which show little sign of abating — at least through the summer, said Oscar Wei, the association’s deputy chief economist, who tracked home buying affordability figures for almost every county in the state.

“I understand in the Bay Area, income levels tend to be a little bit higher compared to other parts of the country,” he said. “But $500,000 or over $500,000 — that’s still a huge number.”

Wei said the lack of affordability is due, in part, to high borrowing costs, which have more than doubled over the past few years, along with already-high home prices, a shortage of supply, and incomes that haven’t grown in tandem with rising costs.

“With interest rates rising that fast — and also, home prices not dropping much — that’s caused housing affordability to come down,” he said.

Three other Bay Area counties — Santa Clara, Marin and San Francisco — fell just behind San Mateo County in terms of the annual income needed for a median-priced home.

The estimates are based on the median price for a detached, single-family home for the first quarter of 2024 and assume a 30-year mortgage, a 20% down payment and a 6.86% interest rate, along with projected taxes and insurance costs.

Across California, only 17% of earners could afford to purchase a median-priced home in their county, according to the realtors association. That’s a steep drop from 2012, when 56% of earners could afford their county’s median-priced home, and a far cry from the current national average of 37%.

Interest rates are expected to come down sometime before the fall, the traditional end to peak home-buying season, Wei said. But a continued shortage of supply is still likely to keep home prices high, he noted.

“I wouldn’t expect a significant increase [in affordability],” he said, adding that he expected the year to end with less than 20% of earners in California being able to afford their county’s median-priced home. “That’s what we can hope for.”

Seeing San Mateo and Santa Clara counties at the top of the list of least affordable counties is no surprise to Ahmad Thomas, CEO of the Silicon Valley Leadership Group, a business advocacy organization. The region’s tech companies have long drawn workers from across the country, leading to a high cost of living for at least the last two decades, he said.

But those higher costs could be justified because they allowed workers to live in close proximity to good-paying jobs, Thomas said. Now, though, as remote work enables many employees to live anywhere, he said the Bay Area’s high housing costs are becoming a vulnerability for the companies that first attracted those workers — and for the region as a whole.

“The advantage that we have versus other regions … it’s not as pronounced,” Thomas said. “It is very hard for working families to make ends meet here, which is not what any of us wanted to see.”

The growth in home prices didn’t just come from tech companies adding new jobs; it was also a product of cities not allowing enough new housing to be built, said Greg Magofña, chief strategy officer at California Community Builders, a housing advocacy group focused on closing the racial wealth gap.

“We just stopped building and stopped acknowledging that [children born in the region are] going to have to move out of our parents homes at some point,” he said. “Or, if you’re like me and are displaced from the Bay Area, you move back into your parents’ front bedroom.”

From 2010 to 2019, the Bay Area added six new jobs for every new home, according to a 2021 report from the rental listings site, Apartment List. In the San Francisco-Oakland-Berkeley and San Jose-Sunnyvale-Santa Clara metropolitan regions, jobs grew by 29% and 33%, respectively, between 2010 and 2020. During the same time, the number of housing units grew by just 5% and 7%, respectively.

For those with family members who already own a home in the area, rising home prices are not necessarily a problem, Magofña said. But it does present a formidable barrier for anyone trying to enter the market without access to generational wealth.

“If you have that intergenerational wealth, then [homeownership] is more open to you as a middle-class person. But, I think a majority of Californians of color don’t have that background,” he said. “It’s really out of reach.”

California Community Builders recently released a report showing an exodus of middle-class earners from the state. The report didn’t look into reasons why people were leaving, but the organization’s CEO, Adam Briones, pointed to high housing costs as a primary driver.

“The dream of home ownership is very much alive, and it’s very much something that working families are pursuing,” Briones said. “People really want to buy a home, and they’re more than willing to leave the Bay Area in California to do so.”