San Jose: The Most Expensive Real Estate Market in the U.S.?

In a previous report, we explained that San Mateo County is the most expensive real estate market in the San Francisco Bay Area. That was based on a county-by-county comparison using median sale prices provided from a single source.

But if we zoom out and look at a variety of housing cost metrics (including the average income needed to buy a home), there’s one California metro area that rises above all other U.S. metros.

As of spring 2024, the San Jose-Sunnyvale-Santa Clara metropolitan area is the most expensive real estate market in the U.S. It currently has the highest median price point, the highest price per square foot, and the largest income required to purchase a home.

San Jose Ranked as Most Expensive Housing Market

Earlier this month, Realtor.com published a housing market update with data for the nation’s 50 largest metro areas. Their report revealed that home buyers in the San Jose metro area (i.e., Silicon Valley) need the highest household income to purchase a median-priced home.

They calculated the income requirement for each metro area based on the following assumptions: an affordability price-to-income ratio of 30%, a 20% down payment, 30-year term, 30-year fixed mortgage rate, and local tax and insurance rates.

According to the May 2024 Realtor.com report:

Six metros across the country required a household income of over $200,000, with California’s largest metros leading the pack: San Jose (household income $361,000), Los Angeles (household income $298,000), San Diego (household income $259,000) and San Francisco (household income $256,000).

Note: While this report used a 20% down payment for comparison purposes, it’s possible to buy a home in California with a much smaller down payment. Check out these low down payment mortgage options.

At the other end of the spectrum, metro areas like Pittsburgh, Detroit and Cleveland required an income in the $60,000 – $70,000 range for a median-priced home.

Similarly, a report from Clever Real Estate published last fall revealed that the San Jose metro area housing market had the highest price per square foot ($845). San Francisco, Los Angeles, San Diego, and New York City rounded out the top five for priciest real estate markets.

Why Silicon Valley Is So Expensive

These reports assign numbers and metrics to something we already knew. The Silicon Valley region of California is one of the nation’s most expensive real estate markets—and by some measurements, the most expensive.

But why? What makes the San Jose real estate market so much more expensive than the rest of the country?

For one thing, we have the “California effect.” It seems almost everything is pricier in the Golden State, from gas to groceries and even houses. But it goes beyond that.

Here are some factors that contribute to the higher home prices in the San Jose area:

• Tech Industry: San Jose is in the heart of Silicon Valley, home to major tech companies like Apple, Google, and Facebook. These companies offer salaries that far exceed the national average, which increases housing demand and home prices.
• Supply and Demand: The San Jose housing market suffers from chronically low supply levels. Zoning laws and other regulations restrict the amount of new housing that can be built. But there are plenty of buyers in the market seeking homes.
• Strong Job Market: The tech industry contributes to a strong job market with lucrative positions, attracting workers from across the country and the world. This further increases the demand for housing.
• Quality of Life: San Jose offers a high quality of life with good weather, excellent schools, and a variety of amenities. This makes it an attractive place to live.
• Cost of Land and Construction: The cost of land in Silicon Valley is extremely high due to limited availability. This, along with stringent building codes and high labor costs, contributes to higher housing costs in the area.
• International Demand: San Jose attracts a significant number of international workers and immigrants, particularly within the tech sector. This global demand for housing further inflates prices.
• Investment Potential: For all of the reasons stated above, the San Jose real estate market is generally considered to be a good investment opportunity. Investors snatch up a lot of properties in the area, increasing demand and driving up prices.

In a sense, all of these factors could be filed under “supply and demand.” The San Jose-Sunnyvale-Santa Clara metro area is the most expensive major housing market in America, mainly because there are way more home buyers than there are properties available.

San Jose Metro Area at a Glance

The San Jose metro area sits in the Santa Clara Valley, surrounded by the Diablo Range to the east and the Santa Cruz Mountains to the west.

The population of the San Jose metro area is approximately 2 million people. The area is also home to several universities and research institutions, contributing to its reputation as a center of innovation and technology.

Major cities in the metro area include:

• San Jose: The largest city in the metro area, San Jose is the center of Silicon Valley and is home to many tech giants like Apple, Google, and Cisco.
• Santa Clara: Another major tech hub, Santa Clara is home to the headquarters of Intel and Levi’s Stadium, where the San Francisco 49ers play.
• Sunnyvale: A center for aerospace and technology, Sunnyvale is also known for its Moffett Field historical society museum which showcases the history of aviation.
• Cupertino: Perhaps most famous for being the home of Apple’s headquarters, Cupertino is another major center for technology and venture capitalism.
• Mountain View: Another prominent tech hub, Mountain View is home to the headquarters of Google and a variety of other tech companies.

Need financing? Located in the East Bay, Bridgepoint Funding has been helping San Jose home buyers finance their purchases for nearly 20 years. Please contact us if you have mortgage-related questions or would like to get pre-approved for a loan.