I’m going to start with some stats. Yes folks, instead of just rambling on and on about how much my rent is, I actually did some research! This information comes from Trulia.com and applies to the City of San Francisco.
Median Sales Price: $1.15 million
Median Monthly Rent: $4,685
Median Household Income: $78,087
*Is it just me or does that last number not match the first two? Congratulations! You’ve just recognized one of the massive problems with the local housing market.
I live on the peninsula where it is a bit cheaper, so let’s check out similar stats for Foster City.
Median Sales Price: $1.1 million
Median Monthly Rent: $4,380
Median Household Income: $117,872
Ah, interesting. See that increase in median income? Foster City doesn’t have a Caltrain station and 95% of its residents commute by car making it much less appealing for residents dependent on public transportation (by need or by choice). Additionally, only 28% of the population is single (compared to 52% in the city), i.e. more two-income households. Foster City also boasts 70% home ownership. Is that the difference half a million in median price makes? No. This area has a booming condo/townhome industry with prices available well under a million. That’s a much more reasonable price for professional-level household incomes under $200,000. [Hello, that’s me!]
And here is a nifty chart from WolfStreet.com that gives a good picture of what has actually been happening with the housing market in San Francisco as compared to both California and the U.S. as a whole.
Yikes. Am I right? According to a lot of sources out there, prices appear to at the beginning of a decline. Let’s hope that is true.
Okay, now let’s run some numbers. If you want to live in San Francisco and keep your rent/mortgage costs (minus insurance and utilities) down around a reasonable 25% of your gross, you’d need a median household income of . . . ::drumroll please::. . . $224,880. Minimum wage in the city is $13, so two adults in full-time minimum wage jobs will have an annual gross household income of . . . ::slide whistle:: . . . $54,080.
What’s the solution? Multiple jobs, cheaper apartments, unsafe areas, horrific commutes, roommates. All unsustainable when you think about the long-term market.
The first thing people me ask when confronted with the rising hiring market is “Well, doesn’t your salary increase too?” Answer: Yes, but not in proportion. Take me for example. I’m a white collar professional with a Master’s degree in a federal position. My salary tripled from low-cost-of-living-Arkansas (and is in a comfortable range for us, did my research there too), while my housing costs quintupled. We are spending around 1/3 of our income on rent alone – a number I would never have even entertained in Arkansas, but one that is considered perfectly acceptable here.
Naturally the situation isn’t quite that cut and dry. There are cost benefits associated with apartment living – no home or yard maintenance, lower utility costs, lower insurance costs – but it certainly doesn’t even out.
So, time to ponder the million dollar question – is it worth it?