San Jose Housing Crisis is Officially Worst in the U.S.
By Loan-Anh Pham, San Jose Spotlight
San Jose’s housing crisis is the worst of any major U.S. city due to its limited supply of homes. That’s according to a recent study from Angi which says the San Jose metro area, which includes San Jose, Sunnyvale and Santa Clara is faring worse than other major metro cities like Washington D.C., San Francisco and Boston in terms of housing supply.
The study employed several factors, including listing rates for new housing on the market, amount of residents moving in and out of the metro area and changes in housing prices. The study says more than 15,000 residents have been displaced over the last two years. The San Jose metro area listed nearly 20 percent less homes on the market this year compared to last year, and housing prices have climbed 7.5 percent in the same time.
Experts say the patterns of skyrocketing prices and limited supply are the result of ongoing housing shortages throughout the Bay Area. Housing supply has been an issue in San Jose and other Bay Area cities for decades, said Shishir Mathur, a professor of urban and regional planning at San Jose State University. Cities have not built enough housing to address growing populations and employment opportunities.
Declining listing rates can be partly explained by the city’s housing market during the COVID-19 pandemic, Mathur told San Jose Spotlight. While low mortgage rates during the pandemic contributed to immense demand for housing, buyers are less likely to purchase homes in light of mortgage rates increasing post-pandemic. Meanwhile, potential sellers who have owned their homes for decades are reluctant to place them on the market.
“The mortgage rates have gone up so you’re sitting on the fence. You’re thinking, ‘Gee, let me see if the mortgage rates drop and the housing prices don’t rise,'” Mathur said. “The sellers are thinking, ‘My house was valued at $2 million dollars six months back… I would rather wait for a few months and see whether my home values go up.'”
Still, homes were on the market for an average of 13 days in June and sellers are closing on deals at an average of 5.6 percent over asking price. The city has thousands of vacant unlisted homes, leaving potential buyers locked out and enduring a competitive rental market. Meanwhile, the average mortgage in San Jose, which includes taxes and insurance, is more than $9,000 a month, requiring a family income of about $216,000 a year.
Housing costs remain high and demand still outweighs supply by a large margin, said Lisa Faria, president of the Santa Clara County Association of Realtors. “There is a scarcity of available inventory,” Faria told San Jose Spotlight. “For a homebuyer trying to purchase a property in the region, competition is fierce. However, if the buyer is pre-approved, they can put a competitive offer in. ”
Housing prices in San Jose have more than doubled since 2012, and housing prices will continue to rise despite increasing interest rates, said Roberta Moore, a broker associate at Compass. Additionally, current San Jose policy restricts development and in turn, limits housing supply.
Building material shortages and construction delays have also contributed to housing shortages, the study notes. Material costs, which make up 71 percent of where funds go alongside equipment and worker wages, increased over the COVID-19 pandemic. Construction costs have long been barriers to affordable housing in the city.
“Costly city fees such as inclusionary housing fees and commercial requirements, as well as rent control policies shift the building of housing to other more business-realistic cities and states,” Moore told San Jose Spotlight. “To thrive, San Jose must change its course by eliminating ideology-driven legislation and adopting realistic and practical business-responsible legislation.”
While upper income families weigh their chances in the housing market, lower income families have little opportunity to break through, Mathur said. “What high housing prices are doing is they’re hollowing out the middle class,” Mathur told San Jose Spotlight. “We have this huge population that cannot afford to buy a house or even rent. Those are the people who, to a certain extent, are getting dissuaded from moving into the Bay.”
Copyright © 2022 Bay City News, Inc. All rights reserved. Republication, rebroadcast or redistribution without the express written consent of Bay City News, Inc. is prohibited. Bay City News is a 24/7 news service covering the greater Bay Area.