Households need to earn at least six figures to even think of living comfortably in Los Angeles or San Francisco. Low supply and strong job growth have pushed California home prices beyond the reach of the typical buyer.
The National Association of Realtors (NAR) calculated the income needed to comfortably afford a median-price home in the state’s six largest metros.
Topping the list is San Jose, with a median home price of $1.07 million. To afford a 5 percent down payment and a mortgage payment with a 4 percent fixed interest rate on a 30-year mortgage, a two-earner family would need to make $232,940 per year to own a home without spending more than a quarter of household income on their home purchase. The recommended income greatly exceeds the actual median income of two-earner households in San Jose, which sits at $165,546.
Two-income households need to earn $177,427 to afford a median $815,000 home in San Francisco-Oakland, $163,276 to afford a $750,000 home in Anaheim, and $122,784 to afford a $564,000 home in San Diego without becoming cost-burdened. In all of those metros, the recommended income is higher than the actual median two-earner income, by $32,587 in San Francisco, $46,143 in Anaheim, and $6,510 in San Diego.
Los Angeles ($105,759 recommended income for a two-earner household), Riverside-San Bernardino ($71,079), and Sacramento ($69,599) have homes that are slightly more attainable for two-income families. In those metros, the recommended income is higher than the actual median income, by $10,871 in LA, $27,045 in Riverside-San Bernardino, and $45,019 in Sacramento.
The median price for a home in LA is $485,800; $326,500 in Riverside-San Bernardino; and $319,700 in Sacramento.
NAR indicates that strong job growth mixed with extreme supply shortages have caused home prices to skyrocket throughout California. Each of the six largest metros has experienced a year-over-year decline in listings, from a 40 percent drop in San Jose to a 6 percent decrease in Los Angeles.
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