Here's What It Takes To Afford The Median Home In San Francisco

Couldn't help but notice this article from Bloomberg the other day featuring the fact that San Francisco's median home price just hit a new high of $1.6 million.

Just to make sure we're clear on terms, median price means that price at which half the transactions are higher and half the transactions are lower. Put a different way, this means that 1 out of every 2 homes currently available for sale in San Francisco is priced at $1.6 million or higher.

I got curious as to what that implies about affordability. What does it take, in the current mortgage rate environment, to purchase such a home?

Here's the "standard" answer, from bankrate.com.

As it turns out, at least from the terms available on this website, one must be able to put down 20% to qualify for the 30-year jumbo loan needed to buy such a home. So, you have to be able to come up with $320,000 just to play. Assuming you can pony up that sort of cash, you get the privilege of tying yourself to a monthly mortgage payment of roughly $6,200 for the next 30 years.

To that, add your property taxes, which will likely run you somewhere between $16,000-20,000 per year, and basic homeowner's insurance for somewhere in the neighborhood (no pun intended) of $2,000 per year. Added together, that's conservatively another $1,500 per month, giving you a total monthly bill of about $7,700. 

What does that all imply? Well, at ratios between 33% - 40% of total income, you would need an annual income of somewhere between $231,000 and $277,000 to satisfy your lender.

So there you have it. Want to live in a median-priced San Francisco home? You'll need to bring an annual income in the $250,000 range and about $320,000 in cold, hard cash to the party.

Depressed? No worries, there is some good news. Here's Bloomberg, to close the article.

One silver lining for people out shopping now: The gain in condo prices has moderated as new units come on to the market. The median condo price increased by a relatively modest 4.6 percent from a year earlier, to $1.18 million.

There, that's better.