Look, I came across this Redfin News analysis that really got me thinking about where we stand in the Bay Area right now. The folks at Redfin ran the numbers on when housing costs might get back to what they consider "normal" levels, and I want to walk you through what they found because it's pretty relevant to what we're dealing with locally.
Here's the baseline they're using: they're measuring housing affordability by looking at how much of your income goes toward a monthly mortgage payment. They're calling it "normal" when we get back to August 2018 levels, where the typical American household was spending about 30 percent of their income on mortgage payments. According to Redfin News, depending on whether mortgage rates drop and how fast home prices grow, we could see a return to normal anywhere from two years to a decade or more. The most optimistic scenario, if rates fell to 6 percent and prices barely budged, would get us there by early 2029. The pessimistic scenario, where rates stay high and prices keep climbing, could push it out past a decade.
What really caught my attention is how the Bay Area is positioned in this analysis. Redfin found that San Jose is closest to returning to normal housing costs in the country right now. They're seeing home prices actually declining year over year while wages in our tech sector are expected to grow strong, so San Jose could hit that "normal" milestone in just over a year even with today's mortgage rates sitting around 7.5 percent. Oakland comes in fifth nationally for how quickly it could normalize, potentially getting there by spring 2028 under current conditions. The reason both metros are doing relatively well is that price declines combined with solid wage growth thanks to our technology industry are working in favor of the numbers improving.
Now here's the catch that Redfin made clear, and it's important to understand. Just because housing costs are getting back to "normal" doesn't mean they're actually affordable. The metrics show improvement relative to 2018 levels, but the absolute price levels in San Jose and Oakland remain out of reach for many households. A median-earning Bay Area family would have had to stretch themselves in 2018 just like they do today, so we're not talking about homes suddenly becoming easy to buy. We're talking about the ratio between prices and incomes improving, which is different.
The report also highlighted the contrast with other parts of the country. In places like Chicago and Long Island, where home prices are still climbing faster than incomes are rising, it could take a decade or more to get back to 2018 baseline levels. That's because those markets are hotly competitive and prices keep moving up, while income growth there isn't keeping pace the way ours is with the tech economy behind us.
What I am seeing locally is that we're in a genuinely interesting position right now. Our markets are experiencing price corrections while incomes continue to grow, which puts us ahead of most of the country in terms of getting back to a more balanced place between what homes cost and what people earn. But let's not get too excited about the word "normal" because for most of my clients, especially first-time buyers, normal still means needing a solid financial foundation and good planning to make homeownership happen.
