A $9,000 mortgage in San Jose? That’s ‘reasonable’, estate agents say


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

They started out with a $900-a-month one-bedroom apartment in the Seven Trees neighborhood when they were both 18, earning $12 an hour at Home Depot. But in October 2020, after years of saving, 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 within walking distance of San Jose City Hall, where Quevedo works as chief of staff for San Jose Councilman Matt Mahan. It cost $775,000 and his mortgage is $4,000 a month.

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


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

Quevedo, who has a 6-year-old son, said he is lucky. The couple moved in with their parents when the pandemic hit and had a series of interruptions in their search for a home. They found a bank willing to give them a loan with a 5% down payment. Just before moving in, the previous owner footed the bill for a $5,000 plumbing job after a pipe burst in the 101-year-old home.

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

What’s driving the skyrocketing 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 housing market, coupled with rising interest rates.” Caviness called a monthly mortgage payment of more than $9,000 “very reasonable.”

Median home value in San Jose in May was just over $1.7 million, up 22.4% from last year. Interest rates, calculated in the Zillow report at 5.78%, have almost doubled since January.

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

That, in turn, means a larger mortgage, which increases the overall stats.

“Young buyers are too young to have saved a lot of money, but they 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 feasible for a family earning $216,000 a year, Wyss said, ridiculous as it sounds. The median 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 townhouses or apartments, Caviness told San José Spotlight.

Despite the demand, Wyss believes the market is stagnant. Wyss, who has been a real estate agent in the area for 15 years, said his 10 active listings in the South Bay haven’t drawn much interest. He said that rising interest rates and a lack of liquidity are beginning to affect sales.

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

Caviness believes the real estate market is in the midst of an adjustment period, but it hasn’t affected prices yet.

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

On the plus side, prospective buyers with tighter budgets face less competition.

Few buyers would be able to 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 salaries in Silicon Valley.

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

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

But Quevedo and his wife grew tired of moving apartments as their careers progressed.

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

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