Housing affordability at “historic low” in Bay Area

It’s technically, slightly more affordable to buy a home at prevailing prices in the Bay Area compared to this same time last year, per the most recent word from SF-based Compass real estate group.

But the improvement year over year is so slight, and the scale of home prices across all nine counties so intimidating, that the marginal improvements reflected in Compass economist Patrick Carlisle’s paper “Housing Affordability in the San Francisco Bay Area” seem almost insulting.

On one hand, “the percentage of households who could afford to purchase a median-priced house ticked up in Q2 2019 as compared to Q2 2018,” Carlisle writes, citing hop from about 15 percent of households affording a home up to 17 percent.

But he’s quick to add, “affordability percentages remain low by historical standards, and the Bay Area typically has among the lowest in the nation.”

For example, drawing on the California Association of Realtor’s (CAR) “traditional housing affordability index,” Compass estimates that in Q2 of 2019, the average homebuyer in the Bay Area should make at least $198,000 per year (taxes not included) in order to truly afford a median-priced house, assuming a 20 percent down payment and median rates on variables like property taxes.

In San Francisco that recommended income balloons to more than $343,000, except when it comes to buyers specifically looking for condos, in which case $252,500 per year will scrape by.

The next most prohibitive area is San Mateo County, where Carlisle suggests making just under $339,000 per year. As always, the determination of who can afford what is based on the federally recommended guideline that residents commit no more than 30 percent of their monthly income to housing costs.

Compass cites CAR projections that the median income for the Bay Area will climb to $105,800 per year across the nine counties, up from $97,250 in 2018.

Right now the US Census estimates that the average San Francisco household makes $96,265 per year, but that figure is from 2017 (still the most recent census number released).

In April of 2018, the Mayor’s Office of Housing adjusted its income limits for affordable housing defined a median income as $82,900 for a single person or $118,400 for a house of four.

For Q2, a median SF home sale price hit $1.7 million per CAR, and exceeded $1.76 million just in June. For the entire Bay Area the price was $960,000—actually down compared to last year’s $1.04 million around the same time, but still an ordeal most earners can’t imagine making.

The mortgage firm HSH, which evaluates housing prices and recommended incomes almost every month, estimates that Compass has overshot the mark.

In May, HSH recommended that SF earners make just more than $186,000 per year before buying. But since few few people manage that either it’s hard to qualify as good news.