Finding a perfect house is difficult. There are many factors that must be considered, including how to finance your future equity. If you have ever desired to live in a warm and sunny city like San Francisco, however, becoming a homeowner may be on the verge of being impossible.
Living in the state of California has many perks. Access to the ocean, beaches, and constant summer weather make it one of the most desirable states in U.S., but not everything is great. The state and the city itself have many drawbacks, some of which include the vast hill, and a significant risk of earthquakes, forest fires and land slides. When all things are considered, however, San Francisco is full of cute homes which remind buyers of Barbie dollhouses and the popular 90s show Full House.
According to Howard/Stein-Hudson (HSH) Associates, the bay city is one of the least affordable in the country. Their report showed that the median family home in San Francisco in 2014 costs a whooping $679,800. When this number is compared to the median family home cost for 2014 in Cleveland, the difference is astounding. In Cleveland, houses average out to $102,100.
In order to be eligible to purchase a home in San Francisco, the average annual household income should be around $140,000 compared to Cleveland’s $30,000. These high prices mean that most young families are forced to move to other states in order to afford a place to live, which can prove to be problematic in just a couple of decades. Soon many of the current baby boomers will move into retirement, and there will be few people to replace them as future generations are unable to afford to live in San Francisco. The housing market is worsened by the events of the 2008 recession, with nearly 9.7 million Americans living in homes that are worth less than their mortgage debts, making homeowners reluctant to sell their property. At the same time, there is a limited supply of homes available for purchase all across the country. New construction is mainly focused on rental apartments and condos, instead of single-family homes.
There are few explanations for the drastic price increases. Much of the blame is placed on the historically low mortgage rates and the housing bust of 2007, as well as the limited supply of homes available. That seems to be just a part of the problem, however. The only cities with major increases in house prices were technology hubs. San Francisco is considered to be a major technology hub city with many technology firms located in the Bay area. Seattle, which is another technology focused city has witnessed similar price increases.
Homeownership is becoming more impossible every year, and cities such as San Francisco are affected. As adults in their 20s and 30s struggle to pay of hundreds of thousands of dollars in student loans, starting a family and owning a home is the last thing on their mind. Many will be unable to earn $140,000 annually in their lifetime and thus be forced to relocate to states where the housing market is cheaper. This abandonment of the warmth and sun of California has the potential to lead to the demise of the San Francisco technology hub.
By Ivelina Kunina