A $9,000 mortgage in San Jose? That’s ‘reasonable,’ realtors say
A house for sale on Chatsworth Place in San Jose. Photo courtesy of Julie Wyss.

    For 15 years, Matthew Quevedo and his wife, A’Dreana, moved from apartment-to-apartment in San Jose.

    They started with a $900 a month one-bedroom in the Seven Trees neighborhood when they were both 18 years old, making $12 an hour at Home Depot. But in October 2020, after years of saving up, they got a piece of the American Dream — the couple bought their first home: A two-bedroom, one-bathroom between Northside and Japantown. It’s walking distance from San Jose City Hall, where Quevedo works as the chief of staff to San Jose Councilmember Matt Mahan. It cost $775,000, and their mortgage is $4,000 a month.

    But they are on the lucky side. A new report from real estate giant Zillow shows the average mortgage in San Jose is now $9,136 a month, including homeowners insurance and taxes.

    That’s a 51% increase from this time last year, and an increase from $8,664 in May.

    Quevedo, who has a 6-year-old son, said he’s fortunate. The couple moved in with his parents when the pandemic began and had a series of breaks when searching for a home. They found a bank willing to give them a loan with a 5% down payment. Right before they moved in, the previous homeowner footed the bill for a $5,000 plumbing job after a pipe burst in the 101-year-old house.

    “So I think the main word attached to our story is just pure luck, which doesn’t speak well for Silicon Valley housing,” he said.

    What’s driving the soaring increase in mortgage payments in America’s 10th largest city? The easy answer is supply and demand, but that’s not all.

    Brett Caviness, president of the Silicon Valley Association of Realtors, attributes the increase to “a combination of rising prices in the real estate housing market, paired with rising interest rates.” Caviness called a monthly mortgage payment north of $9,000 “very reasonable.”

    The average San Jose home value in May was just over $1.7 million, up 22.4% from last year. Interest rates, calculated in Zillow’s report at 5.78%, have nearly doubled since January.

    Beyond higher interest rates, mortgage prices are also being driven up by the demographic of homebuyers in the South Bay. Most first-time homebuyers are young tech workers in their 30s who earn a high salary but haven’t saved enough to make a large down payment, said Julie Wyss, a South Bay realtor with Compass.

    That, in turn, means a larger mortgage – driving up the overall statistics.

    “Young buyers are too young to have saved a lot of money, but are making more money than they ever dreamed of,” Wyss told San José Spotlight. “And then, obviously, this was all happening before interest rates went up and then all of a sudden, affordability went down.”

    A $9,000 a month mortgage is doable for a family earning $216,000 a year, Wyss said, even though it might sound ridiculous. The average annual income in Silicon Valley last year was $170,000, and the median income was $138,000.

    With many tech workers still telecommuting and wanting more home office space, interest in single-family homes is much higher than in townhomes or apartments, Caviness told San José Spotlight.

    Despite the demand, Wyss thinks the market is at a standstill. Wyss, who has been a realtor in the area for 15 years, said her 10 active listings in the South Bay haven’t drawn much interest. She said rising interest rates and lack of liquidity are starting to impact sales.

    “Open houses are dead. We’re doing $100,000 reductions every two weeks. Just nothing,” Wyss said.

    Caviness believes that the housing market is in the midst of an adjustment period, but it hasn’t yet impacted pricing.

    Homebuyers who can afford a “luxury home” — which Caviness defines as a listing of $4 million or higher — may not be impacted by higher mortgage because they can afford it. But those “entry level” homebuyers looking to buy in the $1 to $2 million range are hit hardest.

    One silver lining is that prospective buyers with tighter budgets face less competition.

    Few buyers could offer a 20% down payment on a $2 million home, or $400,000, according to Caviness. But a 10% down payment, or $200,000, may be more reasonable – especially considering wages in Silicon Valley.

    “Obviously that’s still a lot of money, but that certainly could open the window to a new demographic pool of buyers,” Caviness said.

    Quevedo said his family operates on a budget. He compares his mortgage to paying rent. The average rent in San Jose for a two-bedroom apartment is $3,195, according to Zumper.

    But Quevedo and his wife grew tired of having to move out of apartments as they progressed in their careers.

    “That was probably the biggest thing for me,” Quevado said. “I was getting tired of just moving from place to place and the uncertainty of where we would live next.”

    Contact Eric He at [email protected] or @erichejourno on Twitter.

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