Image: Shutterstock
Years ago, Silicon Valley and San Francisco were homes to great ideas, innovations, and technologies. It was known for its financial and business figureheads like Steve Jobs and Thom Weisel. Now, however, San Francisco is recognized for its absurd housing prices that some are saying are so high, even its tech startups are being priced out. Others, however, are saying those housing prices are going to come down—and soon.
The current median price of a condo in San Francisco sits at an alarming $1.11 million, and the median house price has reached $1.25 million, up 88% since 2012. What this means is that only 11% of San Francisco households can afford to buy a house at median market price. And that 11% would require a median household income of $254,000 per year, as well as an extra $240,000 in cash for a down payment. Currently, the median income of the city is $75,600.
Those numbers are rising, and it seems that now, some of those tech startups that moved into the city and drove its housing market up might themselves be priced out of San Francisco. A study by the Indeed Hiring Lab tracked job searches and saw a rise in searches from people 31-40 who searched for jobs in other—less expensive—parts of the country. A similar survey from real estate agency Redfin found that 1 in 7 people in the Bay Area searched the site for homes elsewhere.
The good news is that some cracks in the housing bubble are appearing. Zillow found that sky-high rents are down 5.4% since June and August of 2015. Additionally, startup valuations are falling, slowly airing out the industry bloat. Because of that, venture capitalists can see that the industry is about to undergo serious changes, and they’re less willing to invest.
Additionally, more housing has recently become available in San Francisco. Real estate company Oceanwide Holdings is planning to build an enormous building with two million square feet of both residential and commercial space in the heart of San Francisco. A new resort will also offer a lot of space in the form of 62,500 units. Once those are complete, the city’s current housing stuck of 382,000 units will rise by 16%.
The Bay Area housing market is due for a shake-up. In several years it’s possible that the median prices of apartments and homes will drop to a more manageable number.