You Need to Earn $314,000 to Afford a Bay Area Home in 2023

Buying a home in the San Francisco Bay Area can feel downright impossible. And with increasing inflation and higher interest rates in 2023, the facts back that up. We took a look at the current real estate climate in the Bay Area to get a sense for what you need to earn in order to afford a typical Bay Area home.

With the current data at hand, let’s delve into what salary you would need to buy a house in the Bay Area.

Pricey Homes

First, the median home price in the Bay Area, encompassing all nine counties of Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma, is $1,228,000​.

The general rule of thumb is that you should spend no more than 28% of your gross monthly income on housing expenses, which include mortgage payments, property taxes, and insurance. Assuming a 20% down payment, which amounts to $245,600 for the median home price, you will be financing the remaining $982,400.

Next, let’s consider the current mortgage rate. As of May 15, 2023, the average rate on a 30-year mortgage is 7.00%​. If we plug these numbers into a mortgage calculator, the monthly payment (principal and interest) comes out to be approximately $6,539.

Don’t Forget Taxes

On top of the mortgage payment, you’ll also need to account for property taxes. In California, the average effective property tax rate is 0.79%​. For a house priced at $1,228,000, that would amount to approximately $9,701 per year, or $808 per month. Yes, California is known for taxes!

So, adding the estimated mortgage payment and property taxes, your total monthly housing expenses would be around $7,347.

The Verdict

If we follow the 28% rule, this means your monthly income should be at least $26,238, and consequently, your annual income should be at least $314,856 before taxes.

Please note that this is a simplified calculation and does not take into account other costs of home ownership like homeowner’s insurance, maintenance, and potential homeowner association (HOA) fees.

It also looks at the median home. There are less expensive areas of the Bay Area (like Livermore) where homes are far less expensive. And of course, there are just as many areas that are even pricier!

Additionally, personal financial circumstances, credit score, and debt-to-income ratio can all affect the kind of mortgage rate you might be offered, and consequently, the salary you would need to comfortably afford a home in the Bay Area. We can’t offer you specific financial advice–it’s always best to speak with a financial advisor or mortgage professional to understand your individual situation.

If you can swing it, though, the Bay Area is one of the world’s best and most desirable places to live.

Thomas Smith

Thomas Smith is a food and travel photographer and writer based in the San Francisco Bay Area. His photographic work routinely appears in publications including Food and Wine, Conde Nast Traveler, and the New York Times and his writing appears in IEEE Spectrum, SFGate, the Bold Italic and more. Smith holds a degree in Cognitive Science (Neuroscience) and Anthropology from the Johns Hopkins University.

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