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Bay Area households that rent and hope to buy their first home could need decades to save enough for a down payment and closing costs on a starter home. The estimated time is 28 years in the San Francisco metropolitan area, 43 years in the San Jose area and nearly 50 years in Palo Alto, according to calculations based on a new homeownership affordability study’s methodology.
The time needed to save for a down payment and closing costs in the San Francisco metropolitan area has nearly doubled from 15 years in 2019, when the Center for Responsible Lending conducted its previous study. The center’s research institute, the Julian Bond Institute, recently released the report, “Homeownership Further Out of Reach: The Number of Years First-Time Homebuyers Need to Save for Down Payment and Closing Costs Has Doubled Since 2019,” which examines how rising housing costs have made it harder for families to save enough to buy a home. It analyzes 10 of the nation’s largest metropolitan areas; the San Francisco, San Jose and Palo Alto estimates in this story are separate calculations using the report’s methodology.
Nationally, a household earning the median annual income for renters — about $58,000 — would need 16 years to save for a down payment and closing costs on a starter home, twice as long as in 2019, the report stated. The gap is even wider for Black households hoping to buy a home. They would need an estimated 21 years, up 10 years from 2019.
Across the 10 metropolitan areas analyzed, the report found that the time needed to save had increased substantially since 2019. Housing prices have risen faster than household incomes.
“Families saving for homeownership have a far steeper climb than just a few years ago,” said Mike Calhoun, the center’s president and a co-author of the report. He said the challenge is especially difficult for people who cannot rely on financial help from family.
Bay Area costs
For the local estimates, the calculations follow the national report’s methodology, which assumes households set aside 2.63% of their pretax income annually toward buying a home while continuing to pay rent and cover other expenses. A starter home is defined as one priced at 80% of the local median home price, with a 3.5% down payment and closing costs estimated at 3.65% of the home price. The 3.5% down payment reflects the minimum required for an FHA-insured mortgage. However, many Bay Area homes exceed federal loan limits for FHA-insured mortgages, meaning buyers purchasing those homes may need to use other types of financing. The national report also notes that the average first-time homebuyer puts down 10%, considerably more than the 3.5% assumed in these estimates
About the data
Census information
The U.S. Census Bureau’s American Community Survey publishes one-year and five-year estimates. One-year estimates provide the most recent data for large geographic areas, which this story uses for the San Jose metropolitan area. For smaller cities like Palo Alto, the Census Bureau recommends using five-year estimates because combining data over a longer period ensures greater accuracy and a lower margin of error. This story relies on the 2024 one-year estimates for the San Jose metro and the recently released 2020–2024 five-year estimates for Palo Alto.
Palo Alto median sale price
For The Palo Alto estimate uses a $3.6 million median sale price for June through August 2026, combining single-family homes, townhomes and condominiums, based on Zillow’s market summary.
In the San Jose-Sunnyvale-Santa Clara metropolitan area, which encompasses Santa Clara and San Benito counties, including Midpeninsula cities Mountain View, Los Altos, Los Altos Hills and Palo Alto, the median annual income for households that rent is $103,391, compared with $164,801 for all households in the area, according to data from the U.S. Census Bureau’s 2024 American Community Survey (ACS) 1-Year Estimates, Under the study’s formula, a household earning that renter median would save about $2,719 a year. It would take roughly 43 years to save the $117,260 needed for a down payment and closing costs on a starter home.
At the city level, Palo Alto’s median annual income for renter households is $158,266, compared with $231,101 for all households. The city’s median gross rent is $3,484 per month, according to the U.S. Census Bureau’s 2020-2024 American Community Survey 5-Year Estimates. Under the same formula, a household earning the renter median would save about $4,162 a year. A home priced at 80% of the city’s $3.6 million median sale price would cost about $2.88 million. Estimated upfront costs would total $205,920, requiring nearly 50 years of saving.
About 40% of Palo Alto renter households spend 30% to 50% of their income on housing, while nearly 19% spend more than half, according to SV@Home, citing data from the U.S. Census Bureau American Community Survey.
Even after saving for a down payment and closing costs, a household earning Palo Alto’s median renter income could face another hurdle: qualifying for a mortgage on a home at that price.
The report calls for expanding down-payment assistance, maintaining access to low-down-payment mortgages and increasing the supply of modestly priced starter homes. It also notes that lower mortgage rates alone won’t solve the challenge of saving for upfront costs.
