As home prices continue to climb and inventory remains tight, only a small percentage of California households—fewer than one in five—can afford to buy a home, due to high mortgage rates and soaring property costs.

According to the California Association of Realtors (CAR) Housing Affordability Index (HAI) for the third quarter of 2024, just 16% of California households have the financial means to purchase a median-priced home at $880,250. While this is a slight improvement from 15% last year and 14% in the previous quarter, it still represents one of the lowest affordability rates in the nation, and the dream of homeownership is growing increasingly elusive for many Californians.

California’s affordability rate has remained below 40% for eight consecutive years, dropping significantly since reaching a high of 56% in the first quarter of 2012. In comparison, the national housing affordability index sits at 35%. The statewide index did see slight improvement across 47 of California's 53 counties in the third quarter, aided by a small dip in the average mortgage rate to 6.63% from 7.10% in the previous quarter.

For Southern California, minimal improvement in affordability is attributed to only modest increases in the median home price, which rose 2.9% year-over-year for single-family homes and 1.5% for condos in September. However, high mortgage rates continue to be a significant cost barrier. In Los Angeles and Orange counties, affordability stands at 11% and 12%, respectively—below the statewide average of 16%.

To afford a median-priced home in California, priced at $880,250, buyers would need an annual income of at least $220,800 to cover the estimated monthly mortgage, interest, and property tax payments of $5,520 on a 30-year fixed mortgage at 6.63%. However, only 16% of California households meet this income threshold. Affordability is slightly better for condos and townhouses, with 25% of households able to purchase these properties at a median price of $670,000, requiring an annual income of $168,000.

In Southern California counties, affordability remains among the lowest in Los Angeles, Orange, San Diego, and Ventura counties, with rates of 11%, 12%, 12%, and 13%, respectively. In Los Angeles County, where the median home price is $947,480, buyers would need an income of $237,600 to afford monthly payments of $5,940. Orange County, where home prices are the highest, requires an income of $350,800 to afford the $8,770 monthly payment on a median-priced home of $1.398 million.

Conversely, more affordable counties such as San Bernardino and Riverside have higher affordability rates, at 27% and 21%, respectively.

Nationwide, purchasing a median-priced home at $418,700 with a $2,630 monthly payment would require an annual income of $105,200. Nationally, 35% of households have the means to buy a home, slightly improving from 34% last year.

— Hwandong Cho

<Hwandong Cho>