San Jose’s Real Estate Crisis: What’s Really Broken—and What Happens Next

San Jose has always been one of the most desirable—and expensive—housing markets in the country. But in 2025, we’re past “expensive.” We’re in crisis territory.

On paper, the numbers still look strong. Homes often sell in under three weeks, median prices hover around the mid-$1.4M range, and Silicon Valley’s tech economy continues to pull in high-earning buyers.

But behind those numbers is a different story.

San Jose is now ranked the least affordable metro in the United States, requiring an estimated $370,000+ in annual income to comfortably afford a median-priced home. Home prices have risen far faster than wages since 2019, with some estimates showing 50%+ price growth over that period. Even as prices cool slightly in some segments, the cost of owning (or even renting) a home here is consuming an increasingly unsustainable share of household income.

If you’re feeling like the San Jose housing market no longer works for regular people, you’re not imagining it. As real estate professionals who live inside this market every day, we see both the data and the human impact—buyers burning out, renters doubling up, and long-time residents quietly leaving.

Here’s a clear, no-nonsense look at what’s actually broken in San Jose real estate and where we might go from here.

1. A Market That “Works” on Paper—but Fails Real People

From a pure market perspective, San Jose still looks “healthy.” Median sale prices are roughly $1.4M+ and up modestly year-over-year. Homes typically go pending in under 20 days, which means demand hasn’t collapsed. Roughly half of homes still sell at or above list price, even as price reductions creep into the picture.

For economists, that’s a functioning market. For actual people, it’s something else entirely.

To buy a median-priced home in San Jose, you now need an income that can be three times the national average. Even high-earning tech families are stretching to compete, while teachers, nurses, small-business owners, and service workers are often priced out from the start.

This is the central contradiction of the San Jose real estate crisis: the market is not “crashing”—it’s excluding.

2. Affordability: The Core of the Crisis

To understand why the word “crisis” is fair, you have to look past headlines and focus on monthly cost versus income.

Nationally, housing is considered unaffordable once total homeownership costs (mortgage, taxes, insurance) exceed 30% of median household income. As of mid-2025, that number is around 47% nationwide—already worse than before the 2008 crisis. San Jose pushes that to an extreme.

Median home prices sit roughly in the $1.4–$1.45M range. To buy that comfortably, many households now need an estimated $370,000+ in annual income. Typical rents in many San Jose neighborhoods are often around or above $3,200 per month, putting pressure even on families who aren’t ready or able to buy.

For a lot of households, this creates a no-win situation. Renting can feel like throwing money away, but buying means taking on a mortgage that dictates every other decision in your life—schools, career choices, retirement timeline, even family planning.

When basic shelter demands that level of sacrifice, you’re not just looking at a “hot market.” You’re looking at a structural affordability crisis.

3. The Supply Problem Isn’t Just “Build More Houses”

It’s tempting to solve this with a bumper-sticker answer: we just need more inventory. That’s true—but incomplete.

San Jose’s supply problem is the result of decades of land, zoning, and political choices colliding with modern demand. The city is geographically constrained by hills and baylands, so only a limited share of land remains truly developable. Large swaths of San Jose are still zoned for single-family homes only, which limits density even near jobs and transit.

New construction is slowed by lengthy approvals, high fees, neighborhood pushback, and uncertainty—even as the city tries to encourage more “missing middle” and affordable units. Meanwhile, state-level reforms like ADU laws and SB 9 lot splits are starting to help, but they’re not a quick fix. Even when the rules technically allow more housing, financing, permitting, and local implementation often drag progress down.

In short: we don’t just have a shortage of homes—we have a shortage of the right types of homes in the right places at the right prices.

4. Two Markets, One City: Luxury Boom vs. Middle-Class Squeeze

One of the most uncomfortable truths about the San Jose housing crisis is this: it’s not a crisis for everyone.

Recent data shows that while much of the Bay Area market has cooled, luxury homes—roughly the top 5% by price—have continued to climb, helped by cash-rich buyers benefiting from stock market gains, AI-driven tech wealth, and long-held equity. In the San Jose metro, luxury prices have risen dramatically even as mid-tier homes tread water or soften.

At the same time, mid-range homes are more likely to see price cuts as buyers hit the ceiling of what they can afford. Condos and entry-level homes can feel less competitive, especially when higher HOA dues and financing costs scare off first-time buyers.

The result is a two-track market. On one track, affluent buyers compete for scarce, high-end inventory—and often win with cash and flexible terms. On the other, would-be first-time buyers and move-up families face a wall of pricing, interest rates, and limited “attainable” inventory.

From a critic’s perspective, this isn’t just a market imbalance—it’s a wealth-sorting machine, where housing is increasingly reserved for those who already have significant financial assets.

5. Interest Rates, Locked-In Sellers, and the Quiet Freeze

If prices alone didn’t create the crisis, interest rates finished the job.

Many existing San Jose homeowners are sitting on ultra-low mortgage rates from the 2–4% era. Today’s rates, hovering in the mid-6% range and beyond, make the idea of selling and buying again feel financially irrational.

That creates a powerful “locked-in” effect. Homeowners who might normally move up, downsize, or relocate stay put instead. Fewer move-up buyers mean fewer mid-priced homes hitting the market. Inventory that does appear is often priced aggressively to compensate for the seller’s higher future payment—or it’s distressed enough that many buyers can’t or won’t take it on.

Layer on rising insurance costs, property taxes, and maintenance—and you’ve got a market where people are afraid to move unless they absolutely have to.

At the policy level, San Jose has tried to respond with measures like Measure E funding for affordable housing and initiatives to support denser, more affordable development. But funding construction is slow, and the gap between need and delivery remains huge.

6. So What Now? How to Move Through a “Crisis” Market

Calling this a crisis isn’t about doom; it’s about honesty. The question is: what can buyers, sellers, and residents actually do in a market like this?

From our seat in San Jose real estate, a few themes stand out.

First, redefine what success looks like. For buyers, “winning” may not mean getting everything on your wish list in your dream neighborhood right away. It might mean securing a solid, structurally sound home in a good—but less flashy—zip code, with room to improve it over time.

Second, get radically clear on the numbers. In a market where small rate changes can move your monthly payment by hundreds of dollars, you can’t afford fuzzy math. Serious buyers need real scenario planning. What happens if you buy now versus in 12 months? What if prices stay flat but rates drop—or vice versa?

Third, use every tool available. We’re seeing more buyers lean on down payment assistance and grant programs, ADU potential to generate rental income, and rate buydowns or creative financing structures. These strategies don’t magically fix affordability, but they can turn an impossible purchase into a feasible one.

For sellers, pricing truthfully is non-negotiable. Yes, we’re still in a high-price market, but buyers are more price-sensitive than they’ve been in years. Overpricing leads to longer days on market and larger price cuts. San Jose now sees some of the biggest dollar-amount reductions in the country on discounted listings, often averaging tens of thousands of dollars in reductions. Well-positioned homes—priced correctly, staged thoughtfully, and marketed with a clear story—still attract strong interest. But the era of “list it at any number and wait for 10 offers” is over in most segments.

Finally, work with people who will tell you the uncomfortable truth. In a crisis market, you don’t need cheerleaders—you need advisors. That means agents, lenders, and planners who will walk you through worst-case and best-case scenarios, tell you when not to stretch for a property, and help you spot value in overlooked pockets of San Jose and nearby cities.

That’s the role we believe a modern San Jose real estate team must play: part analyst, part strategist, part guide through a landscape that’s more complex—and more unforgiving—than ever.

Conclusion

San Jose’s housing market isn’t “broken” in the dramatic, headline-grabbing sense of a crash—it’s broken in a quieter, more unsettling way. The system still functions on paper: homes sell, prices hold, and demand persists. But it increasingly works only for a narrow slice of households with high incomes, existing equity, or tech-driven wealth, while more and more regular families are pushed to the sidelines.

Affordability is the fault line running through everything. Decades of limited supply, slow policy response, locked-in sellers, and rising costs have created a market where basic shelter often demands life-altering trade-offs. That’s not just an economic issue; it’s a quality-of-life issue that shapes who gets to stay in San Jose, who leaves, and who never gets the chance to put down roots here in the first place.

At the same time, this isn’t a hopeless story. Buyers who are clear-eyed about their numbers, flexible about location and expectations, and willing to use every tool available can still find real, long-term opportunities. Sellers who price honestly and invest in thoughtful preparation can still achieve strong results. And policymakers, advocates, and residents who are willing to push for smarter density, faster approvals, and more diverse housing types can gradually bend the trajectory of the market in a better direction.

The crisis, in other words, is real—but how we move through it is a choice. In a landscape this complex, the most valuable thing you can have is not blind optimism or fear, but good information, candid advice, and a strategy that fits your actual life—not somebody else’s headline.