The Hidden Myth About Homes in San Jose
Timothy Alston | Broker
Aegis Luxury Real Estate · DRE# 01328224
Published
August 13, 2020
Capital of Silicon Valley
The biggest hidden myth about homes in the San Jose area is this: when prices go up, buying automatically becomes less affordable. That assumption feels logical, but the data tells a different story. According to Black Knight’s Mortgage Monitor Report, the actual monthly cost of buying an average-priced home can fall even as values rise, when mortgage rates drop far enough to offset the price increase.
You know how it feels when you watch prices climb and quietly decide that buying is moving further out of reach? And then you hear about low mortgage rates, but it sounds like just another headline that probably does not apply to your situation? A lot of people considering San Jose homes for sale are carrying exactly that assumption right now.
But here is the part most people have not stopped to think about yet: price and affordability are not the same thing. So before you decide that buying makes no sense in this market, is it worth taking sixty seconds to question whether the numbers actually back that up?
What Does Your Housing Situation Actually Look Like Right Now?
Are you renting? Waiting for prices to drop? Holding off because the market moved and you decided it was not your moment? There is nothing wrong with any of those positions.
But here is a situation question worth sitting with: what is that wait actually costing you? Not in some abstract, long-term way. Right now, today.
If your rent went up this year, that increase does not come back to you. It is gone. And if mortgage rates are quietly making homes more affordable at the same time, the gap between renting and owning may be narrower than you realized. Have you ever stopped to think about what the difference in your monthly outflow actually looks like when you run the real numbers?
That is not a rhetorical question. It is the one most people skip, and it tends to matter most.
During this era, buyers across Silicon Valley were committing an average of 25% of their monthly income just to cover a mortgage payment on an average-priced home. The tech industry was accelerating, property values were climbing steadily, and most buyers simply accepted that a higher income share was the cost of entry. That 25% benchmark became the assumed standard for what housing affordability looked like in this region. What few people expected was that the combination of rising values and falling rates decades later would push that number well below that historical floor.
The Hidden Myth That Shapes How Most Buyers Think About Homes
Here is what the data actually shows, without the spin. Black Knight’s research found that it required approximately 19.8% of average monthly income to cover the mortgage payment on an average-priced home. That is more than five points below the historical average of 25% from 1995 through 2003.
The actual monthly payment on an average-priced home came out to roughly $1,071. That figure was down 6% compared to the same point the prior year, even though average home values had increased by more than $12,000 during that same period.
Think about that for a moment. Home values went up, and yet the monthly payment went down. Does that match what you had assumed?
Mark Fleming, Chief Economist at First American, noted that when the 30-year fixed mortgage rate dropped below three percent, buying power jumped by nearly $15,000. That is not a small shift. That is the kind of change that moves a home from out of reach to within range for a lot of buyers. In practical terms, the average buyer could afford nearly $32,000 more home while keeping their monthly payment exactly the same.
How would that change what you have been looking at?
As rates ticked upward through this period, many prospective buyers in San Jose made a decision that felt logical at the time: wait. The assumption was that if prices were rising and rates were rising together, stepping back made sense. For some, that wait extended into years. What that calculation missed was the relationship between rate changes and monthly payment impact. A single percentage point shift in a mortgage rate on a Silicon Valley home can move a monthly payment by several hundred dollars. Those who waited for a price correction often watched their effective purchasing power shrink instead of grow.
A Hidden Myth About Homes: Inaction Has No Cost
This is the question most buyers avoid because the answer is uncomfortable. If your housing situation stays exactly the same for the next three to five years, what does that actually look like?
More rent increases with no home equity accumulating in return? More years of watching the market shift while your down payment savings get absorbed by rising monthly costs?
Inaction is a decision. It is just one that tends to feel passive. But the financial consequence of staying in a rental while affordability windows move is very real. Can you see how that plays out over a five-year timeline?
In San Jose, homes that were purchased during prior affordability windows, even modest ones, have produced significant equity for the owners who stayed patient. The question is not whether the market has historically rewarded buyers. The question is whether this particular window is one you want to be part of, or one you will look back on later.
Mortgage rates crossed below three percent on a 30-year fixed loan for the first time in modern lending history. For San Jose real estate, this created a scenario most market observers had never seen: home values rising while monthly carrying costs fell simultaneously. The income share required to service a mortgage payment on an average-priced home dropped to its lowest level since 2016. Buyers who acted during this window locked in payment levels that renters in comparable situations could not access, regardless of how long they continued to save.
If the Numbers Work, What Would That Mean for You?
Think about what it would look like if you locked in a monthly payment today that never changed for the next 30 years, while the rents around you continued to climb. What would that stability mean for your family’s planning? What would it mean for the equity you could be building instead of handing over every month?
The hidden myth about homes in markets like this one is that affordability is always moving against the buyer. But the data from Black Knight and First American points in a different direction. The gap between what buyers assume and what the numbers actually show is where most missed opportunities live.
Does that make sense for where you are right now?
Based on what a lot of buyers in this market are working through, the affordability picture is genuinely different from what most people assume. The combination of rate levels and buying power expansion means the homes that looked out of reach twelve months ago may not be out of reach today. That is not a sales pitch. That is what the data is showing.
If you have been thinking about making a move, and you want to understand what your actual numbers look like in the current market, the next step is a straightforward conversation. Not a pitch. Not pressure. Just an honest look at where you are and where you want to be, so you can make a decision that actually fits your situation.
Would that kind of conversation be appropriate for where you are right now? If so, Timothy Alston, licensed Broker (DRE# 01328224) at Aegis Luxury Real Estate in Cupertino, is available to walk through the numbers with you. Reach out directly at (408) 207-4593.
Schools in San Jose
Aegis School Excellence Index · 2024-25 performance data
Serving districts: San Jose Unified SD, Alum Rock Union Elementary SD, Berryessa Union SD, Cambrian SD, Campbell Union SD (partial), East Side Union High SD, Evergreen Elementary SD, Franklin-McKinley SD, Luther Burbank SD, Moreland SD, Mount Pleasant SD, Oak Grove SD, Orchard SD, Union SD. School district boundaries can change; please verify current enrollment boundaries and program offerings directly with the school district.
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Broker · DRE# 01328224
Aegis Luxury Real Estate
Harvard Business School Online, Certified Master Negotiation
23+ Years Silicon Valley Real Estate Experience
Retired Military Veteran
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The data relating to real estate for sale on this display comes in part from the Internet Data Exchange program of the MLSListings™ MLS system. Real estate listings held by brokerage firms other than Aegis Luxury Real Estate are marked with the Internet Data Exchange icon and detailed information about them includes the names of the listing brokers and listing agents.
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Aegis Luxury Real Estate · Timothy Alston, Broker, DRE# 01328224 · 10080 N. Wolfe Rd Ste SW3-200, Cupertino CA 95014 · (408) 207-4593
Last updated: July 03, 2026 | Data reflects July 2026 MLS statistics
