According to a recent study by Creditnews Research, California still remains one of the states with the highest cost of living in the United States, with the middle class facing unaffordability issues in the state.
The report titled “Can the American Middle Class Still Afford Housing in 2024?” conducted by the independent research organization analyzed the relationship between income distribution and housing costs in the top 100 most populous metropolitan areas in the United States to identify the most and least affordable places for the middle class.
Affordability is defined as the housing being considered affordable if monthly mortgage and housing payments do not exceed 28% of the total household income.
The report categorized the income into three tiers based on the Pew Research Center’s family income percentile ranges: Lower-middle class: income $30,001 to $58,020; Middle class: income $58,021 to $94,000; Upper-middle class: income $94,001 to $153,000.
Creditnews Research found that in 2024, out of the top 100 metropolitan areas in the United States, only 52 areas were affordable for middle-class families to purchase a regular home, significantly down from 91 areas in 2019. The metropolitan areas with the poorest affordability were mostly located on the West Coast.
Among the top ten least affordable metropolitan areas in the United States, five were in California, including: San Jose-Sunnyvale-Santa Clara, San Francisco-Oakland-Berkeley, Los Angeles-Long Beach-Anaheim, San Diego-Chula Vista-Carlsbad, and Oxnard-Thousand Oaks-Ventura.
Seaside cities like San Francisco and San Diego, which are highly desirable, are even unattainable for buyers in the upper-middle income bracket.
According to the report, the San Jose-Sunnyvale-Santa Clara metropolitan area in California ranked as the least affordable among the metropolitan areas where the American middle class cannot afford housing. This area, known for its ties to Silicon Valley, is home to tech giants like Zoom, PayPal, Nvidia, and Apple.
To buy a house in the San Jose area, you would need an annual income of $468,252, making it the highest-priced housing market among 221 metropolitan areas surveyed by the National Association of Realtors in April.
Additionally, based on Zillow’s data, the average home price in the San Jose area is $1,461,923, marking a 10.1% increase over the past year.
Creditnews Research warned in the report that the San Jose area faces the risk of becoming a “donut city,” as rising costs are driving a trend of “residents and businesses moving to the suburbs.”
According to the 2023 doxo report, calculated on a monthly payment basis, San Jose is also one of the most expensive cities to live in the United States. Residents in the city face an average monthly expenditure of $3,504, which is 71.2% higher than the national average.
The second least affordable metropolitan area for the American middle class is located just north of San Jose in the San Francisco-Oakland-Berkeley metropolitan area.
Based on a study released by SmartAsset in March of this year, a single individual would need an average annual salary of $119,558 to comfortably live in the San Francisco area.
According to a report from the National Association of Realtors, to afford a typical single-family home in the region, your annual income would need to be $334,676.
The area is a hub for tech companies like Meta, Salesforce, and Google. Zillow’s data shows that the average home price in the area this year is $1,176,322, marking a 2.8% increase from last year.
Creditnews Research pointed out in the report that due to the reputation of the San Francisco-Oakland-Berkeley area as a tech hub, it is unlikely to become an affordable place for the American middle class anytime soon.
In the top ten least affordable metropolitan areas for the American middle class, five other non-California metropolitan areas include: Honolulu, Hawaii; Seattle-Tacoma-Bellevue, Washington; Boston-Cambridge-Newton, Massachusetts-New Hampshire; New York-Newark-Jersey City, New York-New Jersey; and Bridgeport-Stamford-Norwalk, Connecticut.
For middle-class families in the United States, the most economically feasible major metropolitan areas are mainly located in the Midwest, Rust Belt, and certain regions of Texas.
In 2024, the most economically feasible major metropolitan areas in the United States are: Youngstown and Toledo in Ohio, McAllen in Texas, Scranton in Pennsylvania, and Wichita in Kansas.