The Real Reasons San Jose Housing Feels Out of Reach (And What You Can Do)

San Jose’s median home price stands near $1.45 million, making it one of America’s most expensive markets. But price alone doesn’t tell the whole story.

Why is San Jose so unaffordable, even for well-paid tech workers? This article breaks down the root causes—limited land, strict zoning and ADU regulations, skyrocketing property taxes, low inventory, fierce buyer demand, and more—and offers practical strategies and local programs to help you navigate this challenging market.

1. Supply and Demand Dynamics

1.1 Chronic Under-Supply of Homes

• New Home Permits: Only ~1,200 single-family permits issued citywide in 2024—far below needed replacement of aging stock.

• Population Growth vs. Construction: San Jose’s population rose 5% over five years, but housing stock grew only 2%.

1.2 Fervent Buyer Demand

• Pending vs. Active Listings: 980 homes pending vs. 1,250 active—a ratio under 1.3 signals a seller’s market.

• Contingent Offers: Nearly 12% of listings carry contingencies, showing buyers rush to lock in deals.

Result: Too few homes, too many buyers—prices climb, and bidding wars become the norm.

2. Zoning, ADUs & Land Constraints

2.1 Strict Single-Family Zoning

• Large Lot Requirements: Minimum lot sizes of 6,000–8,000 sq ft restrict multi-unit development.

• Upzoning Resistance: Few voters support higher-density zoning, leaving neighborhoods of large single-family lots.

2.2 ADU Limitations

• Permitting Hurdles: Lengthy approval (6–12 months) and high fees ($15K–$30K) discourage accessory dwelling units.

• Rent vs. Cost: An ADU that could rent for $2,500/month may cost $200K to build—only higher-end homeowners can justify it.

Impact: Without ADUs or townhouses, supply remains low and home size inefficient.

3. Sky-High Prices & Taxes

3.1 Average vs. Median Prices

• Citywide Average: $1.6 M

• Citywide Median: $1.45 M

• Neighborhood Spreads: Evergreen (95123) median $1.48 M; Almaden $1.55 M; Silver Creek condos $1.27 M.

3.2 Property Tax Burden

• Base Rate: ~1.18% of assessed value.

• Annual Tax: $17,100/year on a $1.45 M home, plus 0.1–0.2% for bonds, raising costs further.

Effect: Even financing and carrying a home demands substantial ongoing income.

4. Income Disparities & Cost of Living

4.1 Tech Salaries vs. Average Wages

• Tech Median Salary: $150K–$200K.

• Citywide Median Household: $135K.

• Non-Tech Workers: Many service employees earn $50K–$70K, pricing them out.

4.2 Cost of Essentials

• Rent for Workers: $4,600/month for a 3-bed in Evergreen vs. $7,800 mortgage for a similar home.

• Transportation & Auto Costs: Gas, insurance, and parking add $500–$700/month.

Conclusion: High overall costs strain even dual-income households.

5. Neighborhood Prestige & Amenities

5.1 Evergreen & Almaden Appeal

• School Ratings: Jackson Elementary (9.2/10) adds 4% price premium.

• Country Clubs: Almaden Valley Country Club membership drives a 5% neighborhood uplift.

5.2 Cupertino & Tech Corridors

• Ultra-High Prices: Cupertino pockets exceed $2 M median—still in demand for top schools and Apple campus proximity.

Premium: Buyers pay extra for perceived quality and convenience, pushing overall prices up.

6. Limited Alternatives & Rent Pressures

6.1 Condo vs. SFR Trade-Offs

• Silver Creek Condos: $1.27 M median, $700/month HOA—entry point but limited supply.

• Apartments & Townhomes: Low vacancy but rental rates of $3,800–$4,200 strain budgets.

6.2 Buyer Program Gaps

• CalHFA & County Grants: Aid is capped at 3% down-payment—often insufficient for a $1.45 M purchase.

• VA & Physician Loans: Zero down works only for those professions; many still need 10–20% down.

Barrier: Few buyers access the funds needed to compete.

7. Market Forecast & Potential Relief

7.1 Short-Term Outlook

• Modest Appreciation (1–2%) expected in H2 2025 as rates stabilize.

• No Major New Supply until 2027 due to long permit timelines.

7.2 Long-Term Solutions

• Upzoning Initiatives: Pending state laws may force multi-unit allowances on single-family lots.

• Streamlining ADUs: City proposals aim to cut approval time to 90 days and lower fees.

Hope: Structural changes could slowly boost supply and temper prices.

Conclusion

San Jose’s unaffordability stems from chronic under-supply, strict zoning, high taxes, and immense buyer demand fueled by top-tier incomes. Neighborhood prestige—from Evergreen’s school zones to Almaden’s country clubs—drives premiums further.

While rent remains high, ownership costs outpace most budgets, making buyer programs and ADU opportunities crucial lifelines. As your data-driven realtor, Block Change Real Estate helps you navigate these challenges: identifying creative financing, target neighborhoods, and upcoming supply changes so you can make the most informed move in this tough market. Ready to explore your best path to homeownership? Let’s talk.