New Study Shows Bay Area Homes Getting More Affordable, But Not For Everybody

A new study shows that even with rising housing prices during the COVID-19 pandemic, Bay Area homes actually became more affordable because incomes rose at an even faster rate, according to a report by Bay Area News Group’s Louis Hansen. Sounds like great news. But not so fast. 

When looked at in the context of another recent study—this one by United Ways of California—the new housing market data paints a rather grim portrait of widening economic disparities in the Bay Area, and throughout California. Though the United Ways survey, “Struggling to Move Up: The Real Cost Measure in California 2021,” is based on data compiled prior to the pandemic, its revelation that one in three California households does not earn enough income to meet even their most basic needs, much less buy a house, puts the findings of the study conducted by the real estate data firm Attom in a bleaker context. 

So what does the study suggesting Bay Area homes have grown more “affordable” actually say? According to Attom’s data, Bay Area wages rose so fast during the pandemic months that housing prices could not keep up. While workers in Bay Area counties saw their incomes rise between 10 percent and 21 percent, the study found, median home prices in most counties stopped rising at about nine percent. 

In some Bay Area counties, including San Francisco and San Mateo, the median home price actually dropped. Only in Contra Costa, Solano and Napa counties did home price increases outstrip rising wages.

And that is great news—for highly paid workers and investors, largely in the Bay Area’s tech industry. But the Attom study, according to the Bay Area News Group report, simply did not include unemployed workers as a factor. In April of 2020, the first full month of pandemic-related business closures and health restrictions, unemployment in California skyrocketed to a record 15.5 percent, according to data from the state’s Employment Development Department (EDD). 

Some Winners and Many Losers

Even the supposedly good news out of EDD in January 2021 was not that great when looked at in context. Unemployment in that month dropped from nine percent to 8.2 percent, which was definitely an encouraging sign— but it remained more than twice as high as the rate in January the previous year, which was a record-low 3.9 percent.

The Bay Area’s jobless rate in May of 2021 was 5.45 percent—again, nearly twice as high as pre-pandemic levels. 

“Without a doubt, most people earning average local wages are priced out of the house-and-condominium market throughout the Bay Area,” Attom’s Chief Technology Officer, Todd Teta, told Bay Area News Group.

Even for the well-paid tech workers who were the focus of the Attom study, the news isn’t as terrific as may appear at first glance. Yes, high-end homes in wealthy counties such as San Mateo fell in relation to high-end incomes. In that county, home prices dropped 3.7 percent while incomes rose more than 20 percent. 

At the same time, however, the cost of buying a home still exceeds the “28 percent” rule, the generally accepted principle that annual mortgage costs should not exceed 28 percent of one’s income. According to the Attom study, the income needed to buy a home in the Bay area while still holding on to enough cash to meet other essential living expenses ranges from $93,000 ro $246,000 annually, depending on the county. 

Median incomes, on the other hand, range from $63,700 to $162,700. In other words, even in the more “affordable” market that has developed during the pandemic, only those with incomes significantly higher than their region’s average can comfortably shell out for a new house in the Bay Area.

One in Four Bay Area Residents Can't Afford the Bay Area

Seen in light of the United Ways study, the economic inaccessibility of home ownership for most Bay Area residents is not too surprising. According to the study, one of every four Bay Area families makes less than they need to meet the basic necessities of living, including housing and food as well as health and child care, the San Francisco Chronicle reported.

The situation goes beyond the inability to afford housing. According to a CalMatters report, even the state’s falling unemployment rate is deceiving, with recent declines caused largely by discouraged workers who simply dropped out of the job market altogether. Workers who stop looking for jobs are not counted among the “unemployed.”

Likely adding to the economic struggles of the state’s lower- and middle-income workers, a weekly $300 supplement to unemployment benefits, that started in January as part of a federal COVID relief package, runs out on Sept. 6. Based on data from the 24 states that cut off the unemployment “boost” early, mostly in June, ending the supplement will have little effect on the unemployment rate. 

States that have continued to provide the federal supplement have shown basically the same declines in unemployment applications as states that ended the extra $300 per week payments early, according to a report by Forbes.com. But expiration of the extra payments will definitely leave unemployed Californians with $300 less to spend on basic essentials every week. There are still high numbers of unemployed workers in the state. 

For the week that ended July 10, unemployment applications remained 30 percent higher than in the months immediately before the pandemic business closures kicked in, even though the state lifted almost all pandemic-related restrictions on June 15.