Is Buying a Bay Area home a stretch?
Home prices in the Bay Area are out of reach for many middle-income families, but you can certainly afford a house there if you're a highly coveted engineer at Apple or Google, right?
Not so quickly.
Even high-paid tech employees these days have to stretch to buy a property, according to a report by Los Angeles real estate start-up Open Listings, the same individuals also blamed for pushing up home prices. Techies are closer than educators, service sector staff and scores of other workers to affording a costly Silicon Valley home. But homeownership may no longer be a given to them, a move that signals how even the wealthy are shut out by the region's explosive housing prices.
According to the report, software engineers at Bay Area tech firms, including Apple, Google and Facebook, will have to fork over more than 28 percent of their monthly wages to pay for a home within a 20-minute commuting drive from their workplace, a decision frowned upon by financial experts. For example, the average software engineer at Apple makes $188,000 a year, and will have to spend 33 percent of his or her salary in order to afford a median-priced home in Cupertino, Apple's home town, the study said. The mortgage and tax payments will equal 32 percent of their profits for software engineers at Reddit and Google. Twitter engineers and 29 percent of Facebook engineers will have to fork over 30 percent.
Techies are unlikely to get any compassion from other employees in the Bay Area struggling to meet ends. According to an April report by Trulia, teachers, for example, who earn a median salary of $72,340 a year, could afford just 0.4 percent of San Francisco homes.
Individuals whose mortgage payments surpass the recommended 28 percent of their income will have a hard time getting a home loan. If they get a loan, it will not be for the full sum of the price of the home, but for a down payment, they would have to cough up more. And saving a regular 20 percent down payment is hard enough for people still paying high rent rates, not to mention a 30 percent or 40 percent payment.
It's a topic already on the radar of several tech firms in the Bay Area. A letter endorsing a bill by Sen. Scott Wiener (D-San Francisco) that would make it easier to create dense housing near transit stations was signed by more than 100 tech executives and venture capitalists last month.
For example, Zillow reports that the median home value is $2.2 million in Apple's hometown of Cupertino, up more than 20 percent from a year ago.
Many corporations are taking the matter into their own hands. Facebook plans to build 1,500 homes on its expanded Willow Campus in Menlo Park, and as part of its new office construction at North Bayshore in Mountain View, Google is backing the development of nearly 10,000 homes.
Leaving the region is a more cost-effective choice for smaller businesses without the capital to construct housing of their own. That's what happened to the online real estate brokerage that did the testing, Open Listings. In 2015, the start-up was based in the Bay Area as it went through the Y Combinator accelerator based in Mountain View. The creators wanted to relocate to Los Angeles when the program was over.