Quora: How do people in the San Francisco Bay Area afford to buy a home?

Our pal Financial Samurai’s answer:

It’s very simple really.

Salary + Another Salary + Bank Of Mom & Dad = Housing Affordability.

The average person joining Facebook, Google, Apple, Uber, banking, consulting, law etc makes about $100,000 - $175,000 a year right out of college. In 8 years, when they are around 30 years old, they are making $200,000 - $350,000 a year all in. But wait, now each one of these folks shacks up with another person in a similar situation. You’ve now got a household income of $400,000 - $700,000 a year.

With a $400,000 - $700,000 a year household income, you can easily afford a $1,000,000 - $1,500,000 mortgage based on today’s interest rates (~4% for a 30-year fixed, ~3% for a 5/1 ARM according to LendingTree)

Now hold up. You’re saying average people don’t work at places like Facebook, Google, and Quora. Well, despite these tech, finance, consulting, and law firms employing tens of thousands of people, the average person who is willing to come to San Francisco and pay such a high cost of living does indeed work at companies that pay well, otherwise, they wouldn’t be here. Places like SF and NYC are the gravitational centers for gung-ho, highly motivated people.

Further, only about 20.5% of 18–35 year olds in San Francisco own homes and only 36% of the entire SF Bay Area population own property. Therefore, you only need 1/5th to 1/3rd of the population to be earning this type of money to afford a SF Bay Area home.

The debate on what percentage of people should be able to afford a SF Bay Area home is something different altogether.

Bank Of Mom & Dad Is Everywhere

Finally, if you secretly look behind the covers, the Bank of Mom & Dad is ubiquitous when it comes to first time homebuyers in expensive cities around the country. I’ve spoken to hundreds of agents and the estimate is roughly 35% of first time homebuyers get help in the form of a down payment or full payment from their parents. It’s the only logical way if your 25 years old annoying colleague making $120,000 a year suddenly tells everyone he just bought a $1,200,000 condo!

I’ve surveyed all my neighbors over the 10 years I lived in the Marina and now the three years I’ve lived in Golden Gate Heights, and practically every one of them got help from their parents. That’s the world we live in folks. The Baby Boomers are the wealthiest generation in history because they been able to save and invest the longest during the biggest boom in history.

Just be careful to not turn out like a couple of my deadbeat neighbors who are 20-something year old guys with no motivation to do anything because they get to live for free in a paid off, multi-million dollar home. To be gifted wealth instead of earning it is one of the worst curses ever!

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So I need to tap Grandpa Manch and Grandpa Wuqijun for my next down payment?


400k income only afford 1M mortgage? Way too conservative. You can be approved for 2.6M mortgage. If you want to be conservative, get a 1.6M mortgage and leave some room for you to invest in stocks or consume more