Soaring home prices in the Bay Area are eclipsing the median buying power of local residents at some of the highest levels in the nation.
That’s according to data from First American Financial Corp., which found the housing markets in at least half of the nation’s major metro areas are overvalued compared to local buying power.
Home prices have soared nationally over the past decade — especially during the pandemic — and that’s driving a significant affordability crisis in many regions.
High interest rates and a sustained lack of inventory aren’t helping matters.
In California, sky-high home prices among other factors have prompted many to leave the state, and housing affordability in Silicon Valley and San Francisco remains a significant challenge even with tech layoffs and migration trends.
In the San Francisco metro area, which includes Alameda, Contra Costa and Marin counties, buying power was $624,823 compared to the median existing home price of $1,101,250 — meaning homes were valued at 76% above buying power.
Meanwhile, the San Jose metro area’s market dynamics revealed even larger gaps between income and values with homes coming in at 98% above buying power. Buying power in San Jose was $722,849, while home prices were almost double, at $1.43 million.
As of March, homes in several other California cities were among the nation’s most overvalued compared to local buying power.
Los Angeles’ gap was highest in the U.S., with buying power at a mere $413,108 compared to the median existing home price of $923,750 — meaning homes were valued at 124% above buying power.
San Diego’s median price was 80% higher than what its residents could afford.
Elsewhere in the country, buying power data suggests several cities across the Rust Belt have significant opportunity for property to appreciate.
Some also rank among the strongest markets for first-time homebuyers.
In Detroit, median home prices were $216,126. That’s 44% below the local buying power of $388,258. After a period of challenges, the Motor City more recently has become a poster child for revitalization amid a frenzy of new development.
In Cleveland, homes were selling near $182,500 while residents could typically afford $310,572 — 41% less than local buying power. In Pittsburgh, the median home price of $188,100 was 39% below the buying power of $310,802.
Economists say housing prices continue to pinch many buyers — and interest rates aren’t helping matters.
Researchers at Redfin Corp. noted earlier this year that homeowners are staying in their homes twice as long as they did back in 2006, when the median homeowner spent 6.5 years in one place.
That figure reached 13.4 years in 2020 but has since dipped to 11.9 years as of 2023.
“Americans who already own homes benefit from rising values and can consider themselves lucky they broke into the housing market while they could still afford it,” said Elijah de la Campa, senior economist at Redfin, in a statement. “On the other hand, price appreciation makes the prospect of buying a new home daunting or even impossible for many people who want to move.”
