San Jose named least affordable city for first-time homebuyers, study finds
One city in the Bay Area has been declared the world's absolute worst in the world when it comes to housing affordability for new homebuyers, a new analysis finds.
According to a new study by Remitly of more than 150 cities worldwide, San Jose is the most unaffordable when comparing average incomes versus the cost of a typical starter home.
"It's not the greatest title to have here in San Jose," said Mike Bui, the president of Equity One Real Estate and a lifelong San Jose resident.
Bui said the prices for starter homes in once affordable areas like Blossom Valley are now out of reach for the city's working, middle-class residents.
"I would have never imagined that these homes that would sell for $400,000 now sell or trade for $1.8 million just in a matter of 12 to 15 years," says Bui.
He says a lot of what is driving the massive price increases are people who work in other parts of Silicon Valley being forced to move south to San Jose to find housing they can afford.
"A lot of the buyers who can no longer afford to buy up the Peninsula, where it's Sunnyvale, Santa Clara, Mountain View, they've all come down to San Jose," he said.
According to the study by Remitly, the average home price in San Jose is $1.37 million while the average worker makes about $86,000 a year, with a two-income family making an average of $173,000 a year. That still leaves a potential homebuyer short by about half.
Bui said that's what forces people in San Jose to look further south to Gilroy, Hollister, or Morgan Hill for something less expensive.
San Jose Mayor Matt Mahan also blames the tech boom for the unaffordability issues.
"Silicon Valley has created about eight jobs for every one new home we have built over the last 20 years. San Jose has actually been the net housing provider. We've actually been the best actor in the region," says Mahan.
The mayor said this is simply an issue of supply and demand and says the city is doing everything it can to greenlight new housing projects.
Bui said expanding traditional lending programs could also help first-time homebuyers.
"It's programs to really help with lending, down payment, shared equity. That's the only way to help our normal people within the Bay Area to purchase properties there," he says.
California did not fare well in the study. San Jose was ranked the least affordable, but Los Angeles ranked second, followed by Long Beach and San Diego.