Can San Franciscans Afford a Home?
When you look at the landscape of who is actually doing the buying of the in-demand homes of San Francisco, it can get a little bit confusing. It was found that only about 40% of San Franciscans can actually pay the mortgage of a median-priced home without being stressed financially. This means that less than half of us can afford a home that fits our family and still live comfortably (most people assume that paying more than 30% of one’s income toward a mortgage will result in being uncomfortable). Note that there is some debate on that numbers, as the California Association of Realtors just found that only 11% of people could afford to live comfortable in a median-level home.
Now, the website Unison, which is in the home finance industry, has estimated that only 1% of San Francisco properties can be owned by a middle-level earner. With all of the talk about affordable housing and making the Bay Area more home-buyer friendly, it seems like we might be moving in the wrong direction. It is important to note that Unison only looked at those between the ages of 25-44, the people in their prime to buy homes. This is interesting because San Francisco is one of the top places for millennials to move due to the economic prosperity and employment opportunities, but it doesn’t seem like they can afford it.
Now, in order to be thoroughly afraid, we have to look at the numbers that unison used. These numbers come out of a median monthly estimated income of $7,708 (roughly $92,501 per year) and had a rate of 45% of that income going toward a mortgage. For many people, that salary is a pipe dream. Still, many millennials in San Francisco are making upwards of $100,000 per year.
When you add in a 20% down payment, the number of people who can afford the monthly payments rises to just about 4%, but once again, very few people have that large amount of money saved up to make a down payment.
We should be afraid of these numbers, or at least concerned about them. Per the Federal Reserve Bank of St Louis blog: “First-time homebuyers have represented 20-40 percent of total home sales over the past 10 years, according to the National Association of Realtors. Most first-time buyers are 25-44 years old; their actions have helped drive the housing market and have been an engine for economic growth across the nation.”
In San Francisco, it is even more important. Though it is a lower amount than in other cities, last year’s survey found that about 38.5% of the population of San Francisco falls into that 25-44 age range. So where are they living? They aren’t buying their homes. Instead, they are renting and a larger percentage than you may think actually live in AirBNBs. These people move from apartment to apartment, trying to save up money to actually settle at some point. Sadly, they aren’t saving enough for that.
Looking toward the future, things look much better. Student loan debt is the number one reason why millennials can’t afford to purchase homes, and since San Francisco is doing a lot of work to try to abate that problem, we could see an upswing in a few years.