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How much income does it take to buy a home in SF?

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Housing security is a six-figure affair these days

aerial shot of homes in san francisco in Noe Valley. Photo by Laura Baker Bowers/Shutterstock

What does it take to buy a home in San Francisco these days? For starters, a lot of optimism. But you’ll also need a hefty annual income; New York-based finance site Smart Asset suggests at least $172,000 per year if potential homeowners want to stay out of debt.

Last week, Smart Asset economist Derek Miller published a breakdown of home prices and income brackets examining what it takes in dollars and cents to buy a home in 15 major U.S. cities, starting with San Francisco.

In part, Miller writes:

In order to model the salary needed to afford home payments, we used five inputs: home value, down payment, property tax rate, homeowners insurance, and other monthly debt payments. [...]

We started with the median home value in each city and calculated how much a 20 percent down payment would cost. Then we plugged that data into our mortgage calculator. We assumed that each prospective homebuyer would get a 30-year mortgage with a four percent interest rate for 80 percent of the home value. [...] We also assumed that buyers would have annual homeowners insurance of 0.35%.

The results: Based on an estimated median SF home value—which is distinct from the city’s median home price—of just over $1.1 million, Miller suggests that homebuyers should make at least $172,153 annually (taxes not included).

Potential debt payments of $500 per month on the purchase bump up necessary funds to $188,819 per year—and $1,000 in monthly debt means $205,486 per year.

Miller bases this off of an estimated “total monthly home payment” of $5,165 per month, which adds up to roughly 36 percent of the recommended $14,346 monthly income.

Technically, this would make the hypothetical homebuyer “housing cost burdened” under the standard U.S. Department of Housing and Urban Development (HUD) equation recommending that residents commit only 30 percent of income to housing.

For the Smart Asset $5,165-per-month cost, that would mean making $17,145 each month, or $205,740 annually.

Mortgage site HSH bases its latest monthly exercise in recommended minimum incomes for SF on a cheaper median home price but still ends up recommending a higher income—almost $200,000 annually.

Based off of a median home price (not value) in SF in February of $952,200 and 20 percent down, HSH’s report crunches a monthly $4,642 payment.

That means in order to meet the monthly housing costs without stretching too thin, homebuyers should take in at least $198,978 per year (again, taxes not included).

Note that this figure is up significantly since the spring of 2018, when HSH pushed a target income of just over $176,000.

In 2018, the city estimated that the average single-person San Francisco household brings in $82,900 each year, while a family of four pulled in $118,400.