It’s cheaper to rent a home in San Jose than buy one, though renters still pay steep prices in one of the most costly cities in the nation.
A report by real estate platform Clever ranks San Jose as the No. 1 most expensive city to buy and rent, out of the 50 most populous U.S. cities. The median buying price for a house in San Jose is about $1.5 million and the median home rental price is $3,331 monthly. The second most expensive city to buy a home is San Francisco at $1.1 million and third is Los Angeles at $925,000.
The study compared median home buying prices to median annual rents to find whether it’s more cost effective to rent or buy homes. San Jose ranked as the best city to rent in, because of the ratio of home buying price versus rental price. In comparison, the most cost effective city to buy a home in is Cleveland, Ohio, where the median home buying price is $187,413 and median rental price is $1,416.
Michelle Perry, president of the Santa Clara County Association of Realtors, said over the past decade she’s seen more people moving into Silicon Valley from out of state or other countries and buying homes. It’s the locals who can’t afford to buy.
“The change is for those that have been living in this community, possibly born and raised (here who) are not part of the tech moving base,” Perry told San José Spotlight. “These individuals are the ones that want to stay and buy but (homes are) out of their reach.”
Brett Caviness, local realtor and former president of the Silicon Valley Association of Realtors, said renting is often necessary while buying a home is a long-term commitment. As a real estate agent, Caviness said he can’t comment specifically on the rental market, but renters and buyers have different needs. Renters look for short-term benefits at a lower price, while buyers see their homes as long-term investments.
“You can pay a lower rent today but you’re not going to make any money on that property, versus a mortgage, you’re going to pay a lot more in monthly and yearly costs, but you’re also building wealth,” Caviness told San José Spotlight.
He added first time buyers rarely pay for their homes alone. Caviness said he often sees dual-income tech workers looking to buy homes, but also sees buyers getting support from their families or jobs. Some employers such as Stanford University have loan systems to support workers in buying homes.
“The American dream is to buy a house, if you take a look at what our country is. You can own your own house, back in the day. … that is not possible for the majority (today), almost everybody.”
Scott Myers-Lipton, SJSU sociology professor emeritus
Silicon Valley residents struggle with the region’s exorbitant cost of living. With the nation’s most expensive monthly bills and the second most expensive housing market, residents are consistently squeezed by the region’s affordability crisis. The 2024 Silicon Valley Pain Index, an annual report of inequity in Santa Clara County, found that nine households hold $110 billion in liquid wealth — 12 times more than the bottom 50% of households in the region.
Scott Myers-Lipton, SJSU sociology professor emeritus and co-author of the pain index, said homeownership is barely an option. He cited a report by the California Association of Realtors, which found that only 20% of Santa Clara County households can afford the region’s median home price.
“The American dream is to buy a house, if you take a look at what our country is. You can own your own house, back in the day,” Myers-Lipton said. “That is not possible for the majority (today), almost everybody.”
The ratio decreases for residents of color, with only 7% of Black residents and 9% of Latino residents being able to afford homes in the county.
This story originally appeared in San José Spotlight.
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