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Silicon Valley housing at a glance
- The median price for single-family homes in both Santa Clara and San Mateo counties is more than double the state’s median home price of $868,100 and more than 4x the U.S. median home price of $416,700.
- In the two counties combined, only one out of 805 active listings is affordable for households with an annual income of $100,000.
- Only a quarter of first-time homebuyers in Silicon Valley is able to afford a home, while more than half (51%) can afford one nationwide.
- The sales of single-family homes priced under $1 million have accounted for only 1% of all transactions statewide each year since 2021.
- Less than 10% of Black and Hispanic/Latino housholds can afford a median-priced home in Santa Clara/San Mateo counties, while 19% to 25% of white/non-Hispanic and Asian households can afford one.
Housing affordability has become significantly worse in Santa Clara and San Mateo counties – so much so, that only one out of every 805 homes listed for sale is affordable for households with an annual income of $100,000, according to a new report from regional think tank Joint Venture Silicon Valley.
Over the past two decades, housing costs have surged significantly, contributing to a decline in housing affordability in the region. These high costs have exacerbated disparities in homeownership by race and ethnicity, with particularly dramatic impacts for first-time homebuyers, the Home Affordability report states.
The report concludes that the downward trend in affordability “is widespread throughout the Bay Area and California as communities struggle with the dynamics of a constrained housing market.”
Home prices 4x higher than national market
The median price for single-family homes in both Santa Clara and San Mateo counties is more than double the state’s median home price of $868,100 and more than four times the U.S. median home sale of $416,700, the report highlights.
According to the California Association of Realtors September 2024 market statistics, the median sale price for a home in Santa Clara County was $1.9 million and $2.1 million in San Mateo County.
Buyers in the greater Bay Area need a minimum qualifying income of $214,800 annually to afford a median home, according to the association’s statistics. In San Mateo and Santa Clara counties, the qualifying annual income is above $500,000. The median household income in Silicon Valley, according to Joint Venture’s Silicon Valley Index, is $149,600.
First-time homebuyers getting priced out
In conjunction with Silicon Valley’s rising median home sale price, the estimated share of first-time homebuyers able to afford a home has declined, the report states. In Santa Clara County, only 25% of first-time buyers can afford a home, a decline of 17 percentage points since 2014. In San Mateo County, only 23% can afford a home, a decline of 10 percentage points.
In comparison, 26% of first-time homebuyers can afford a home statewide, and 51% can afford one nationwide, according to the report.
Disparities exist by ethnicity
Additionally, significant disparities exist in housing affordability by ethnicity in Santa Clara and San Mateo counties. Only 9% of Black households are able to afford a median-priced home in Santa Clara County,while 8% can afford one in San Mateo County. Only 8% of Hispanic/Latino households (8% and 10%) households are able to afford a home in Santa Clara County, while 10% can afford one in San Mateo County. These numbers are well below the share of White, non-Hispanic households that can afford a home (21% in Santa Clara County and 19% in San Mateo County) and Asian (25% and 20%) households.
These disparities are also reflected in markets throughout California, the report concludes.
This report by Heidi Young was originally published on SiliconValleyIndicators.org. Read the report here.
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Need to build more!
The housing crisis will continue for lower-income and middle class families as long as we continue to have housing policies that maximize construction of expensive, market rate units. That is what our housing policies do today.
Building tons of market rate units simply do not help these people today. If one cannot afford a median priced home, obviously one cannot afford a home that is even more expensive. Under State density bonus laws, developers obtain benefits when 11% of units are affordable as defined by RHNA income category targets. Why would a for-profit developer build more than 11% of such units in any new housing project? Developers want to maximize their ROI; to build more affordable units simply does not make any business sense.
Pricing on homes is affected by BOTH Supply and Demand (in addition to other factors, such as the incomes of potential buyers). When employers hire lots of workers, Demand for housing goes up. If Supply goes up, but Demand also goes up, the price of homes will NOT go down. Why would it? As long as there is Demand for expensive, market rate homes, developers will be more than happy to build them. And the reality is, there is very strong Demand for these homes.
Prices will only drop when Supply EXCEEDS Demand. But that would require that Supply continues to increase when Demand is dropping. That will never, ever happen in the real world. Another way to describe Demand is “market conditions”. Developers are savvy business people who pay close attention to market conditions. They know that if Demand for market rate housing is dropping, they will have more difficulty selling such units. In addition, they will also have more difficulty raising funds from investors to finance a new housing project. Investors pay attention to ROI, if the return is not high enough they will look at other investment opportunities instead. When funds cannot be raised for a new housing project, the building stops. Exhibit A is Google and its previous plans to build 15,000 new units in the Bay Area. They put those plans “on pause” because market conditions were no longer acceptable to them.
“Google ends deal to build 15,000 Bay Area homes due to “market conditions” – https://arstechnica.com/tech-policy/2023/11/google-cost-cutting-ends-deal-to-build-thousands-of-affordable-housing-units/
We lack affordable housing because nobody has figured out how to get rich from building it. Creating tons and tons of market rate units is an extremely poor strategy to lower the cost of housing. Construction of such units will continue as long as Demand is strong for them. When Demand slows, construction stops. The only players who benefit from housing policies that maximize the production of market rate units are those who actually BENEFIT from market rate units: for profit investors, corporate landlords (who buy the units in order to rent them to those who cannot afford to buy them), global investors, and employers whose hiring practices increase Demand for market rate units.