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Bay Area real estate: buying may be cheaper than renting
New housing reports show it may be less expensive to buy a home than rent. A closer look at which cities are the best and worst to be a homeowner.
ATHERTON, Calif. - Purchasing a home can be a great investment with many benefits.
The typical 30% rule of thumb, which recommends homeowners spend no more than that percentage of their income on housing, has grown.
In fact, in three of the Bay Area's most expensive cities, buyers need to earn between $1 million to nearly $2 million yearly to afford a median-priced home.
What they're saying:
Realtor.com senior economic research analyst Hannah Jones said most homebuyers would need to spend more than 30% to afford a median-priced home in their area.
"This is not only the case in affordable areas, but also in the country’s highest-priced towns," Jones said in a previous report.
The real estate listing website examined the nation's five most expensive cities, three of which are in the Bay Area, with at least 20 listings over the past year and populations between 5,000 and 100,000 residents.
They determined the minimum salary needed to afford a median-priced home in those cities with a 20% down payment and a 6.72% mortgage rate, applying the 30% rule.
Most Expensive Bay Area Cities
Atherton
What we know:
A typical home in Atherton costs $8.9 million, and the median household income is $397,264. However, according to Realtor.com, the recommended household income is $1.85 million a year, with today's mortgage rate and 30% down.
"The typical home would require more than triple the typical household income to afford," Jones said.
The monthly payment for a typical home in Atherton with today's rate and 20% down would be $46,168 or $554,011 per year.
Jones mentioned that buyers in these high-priced cities don't typically take out mortgages, but if they did, they would put down more than 10% to 20%.
Hillsborough
What we know:
The median listing price for a home in Hillsborough, where tech giant Elon Musk once lived, is $5.8 million. The median household income is $414,113, though the recommended household income is $1,218,307.
For a median-priced home in Hillsborough with 20% down at today’s mortgage rate, the monthly payment would be $30,458 or $365,492 a year.
Los Altos Hills
What we know:
The charming city of Los Altos Hills, near Stanford University, has lured notable names such as Google co-founder Sergey Brin and Barry Bonds who reportedly owned homes there.
The median listing price for a Los Altos Hills home is $5,789,000. The median household income is $361,901, though the recommended household income is $1,197,823.
For a median-priced home in Los Altos Hills with 20% down at today’s rate, the monthly payment would be $29,945 or $359,347 per year.
The Source: Information for this story comes from a report by the real estate listing website Realtor.com.