How many people can buy a home in California? It depends on the down payment
Three reports, one result – affordability is a big challenge for most home shoppers in California, especially for Blacks and Latinos.
Falling home prices have failed to offset higher mortgage rates, as only one in four (21%) households could afford to buy the median-priced home in 2022, compared to one in five (27%) a year earlier, according to the California Association of Realtors.
California’s median home price was down 18% in March from the peak reached in May 2022, but higher mortgage rates – about double the rate in less than two years – have added several hundred to as much as a couple of thousand dollars to the monthly mortgage payment, according to multiple reports.
The additional dollars are needed because higher mortgage rates have essentially slammed the door on homeownership, at least for now, for most wanna-be buyers. Buyers either have to come up with a bigger down payment, home prices must slide or mortgage rates need to tumble – or a combination of all three, according to housing experts.
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Housing affordability by county and ethnicity
| County | All | White | Asian | Black | Latino |
| California | 21% | 26% | 31% | 12% | 12% |
| Fresno | 39% | 48% | 47% | 30% | 31% |
| Kern | 39% | 46% | 54% | 34% | 25% |
| Los Angeles | 17% | 25% | 22% | 10% | 9% |
| Orange | 14% | 16% | 15% | 8% | 12% |
| Riverside | 28% | 31% | 36% | 24% | 31% |
| Sacramento | 32% | 35% | 38% | 26% | 21% |
| San Diego | 18% | 22% | 23% | 9% | 7% |
| San Francisco | 20% | 21% | 17% | 12% | 8% |
| Santa Clara | 21% | 18% | 27% | 9% | 7% |
Source: California Association of Realtors
OUCH! $4,700 MORTGAGE PAYMENT EVEN WITH 20% DOWN
CAR’s affordability figure is based on a 20% down payment for the $822,000 median-priced home, a hefty amount for most buyers. And homebuyers who can afford a 20% down payment ($164,000) would need to earn about $187,000 and pay $4,700 monthly.
Three Bay Area counties – San Francisco, San Mateo and Santa Clara – demand household incomes of at least $408,000. Bakersfield (Kern County) and Fresno were the only of the 16 counties in the report where households earning less than $100,000 could afford to buy the median-priced home in their regions.
ATTOM crunched data in California and found similar results. Declining home prices and increasing wages are helping households, but it’s not enough with the highest mortgage rates since the Great Recession. Three of the nation’s least affordable housing markets are in California – Los Angeles, Orange and San Diego counties.
“The soaring housing market has finally come back down in much of the U.S., at least for now, while worker pay is growing,” says ATTOM CEO Rob Barber. “That’s produced some benefits for home seekers in the form of slightly better affordability, especially as lending rates have flattened. Things certainly haven’t swung way back into friendly territory. Price drops and wage gains haven’t yet translated into equal improvements in affordability. And the trend could go back the other way if interest rates go up again, as expected.”
Median home price, monthly payment and income needed to purchase by county
| County | Median home price | Monthly payment including taxes and insurance | Minimum household qualifying income |
| California | $822,320 | $4,670 | $186,800 |
| Fresno | $410,000 | $2,330 | $93,200 |
| Kern | $375,000 | $2,130 | $85,200 |
| Los Angeles | $849,410 | $4,820 | $192,800 |
| Orange | $1.24 million | $7,010 | $280,400 |
| Riverside | $615,000 | $3,490 | $139,600 |
| Sacramento | $541,000 | $3,070 | $122,800 |
| San Diego | $911,000 | $5,170 | $206,800 |
| San Francisco | $1.8 million | $10,220 | $408,800 |
| Santa Clara | $1.8 million | $10,210 | $408,400 |
Source: California Association of Realtors
ATTOM: ONLY SAN FRANCISCO ENJOYS AN INCREASE IN AFFORDABILITY. YES, SF WHERE $1.25 MILLION IS THE MEDIAN PRICE
ATTOM’s affordability report is based on how much the average household would need to spend on the median-priced home per year – largely the monthly mortgage payment. The amount ranges from 79% in Orange County to 39% in Fresno County, but all are above the largely accepted maximum spending of 30% on housing.
Nine of the 10 counties demanded more money to purchase in the first quarter compared to a year ago. San Francisco’s 14% decline in home prices to a mere $1.25 million has helped homebuyers, who only need to spend 48% of their income compared to 60% a year ago.
Realtor.com chief economist Danielle Hale expects home prices to continue to decline nationwide, especially if the demand for homes drops and interest rates rise.
A decline in home prices would “help all segments of the market, especially high-end areas that suffered some of the larger price declines since the market started to stall last year,” Barber says.
ATTOM: Median price and percentage of household income needed to purchase
| City | Q1 2023 median home price | % of income needed to buy 2023 | % of income needed to buy 2022 |
| Bakersfield | $324,750 | 39% | 29% |
| Fresno | $355,000 | 43% | 35% |
| Los Angeles | $785,000 | 64% | 52% |
| Orange | $950,000 | 79% | 63% |
| Riverside | $550,000 | 65% | 48% |
| Sacramento | $470,000 | 41% | 32% |
| San Diego | $765,000 | 63% | 51% |
| San Francisco | $1.25 million | 48% | 60% |
| San Jose | $1.28 million | 46% | 44% |
| Shasta County (Redding) | $343,000 | 41% | 35% |
Source: ATTOM
A SMALLER DOWN PAYMENT SHUTS THE DOOR FOR MANY WANNA-BE BUYERS
The ATTOM and CAR reports, as mentioned, are based on a 20% down payment. What happens when the down payment drops to 3%?
Only a fraction of households – less than 1% in Los Angeles, San Diego and San Francisco counties – could afford to buy the median-priced home in their region and spend 30% or less on housing, according to Redfin. It’s a dramatic decline from just a year ago, when lower mortgage rates made buying a home possible for many middle-income families in California.
“Housing affordability is at the lowest level in history, which will widen the wealth gap, especially between millennials,” says Redfin deputy chief economist Taylor Marr. “Many millennials were able to buy their first home before or during the pandemic homebuying boom, but many others were priced out of homeownership and forced to keep renting. That means a lot of young adults missed out on a major wealth-building opportunity: the value of homes owned by millennials has risen nearly 30% in the past year.”
The disparity affects Black and Latino households the most. Nationwide, only 9% of Black families and 14% of Latinos could buy a home, according to Redfin. The California Association of Realtors found similar results at 12% for Black and Latino households, about half the 26% rate for whites.
“Housing has become incredibly unaffordable for a lot of Americans, but Black families have been hit especially hard because they’re often less wealthy to begin with,” says Redfin chief economist Daryl Fairweather. “On average, Black Americans earn less money, have less generational wealth, and have lower credit scores than white Americans. That makes it tougher to afford a down payment and qualify for a low mortgage rate.”
Redfin: Percentage of affordable homes available for typical households by city
| City | % of affordable homes for typical households in 2022 | % of affordable homes for typical households in 2021 |
| Anaheim | 1.9% | 6.2% |
| Bakersfield | 10.5% | 22.8% |
| Fresno | 8.9% | 22.8% |
| Los Angeles | 0.5% | 2.1% |
| Oakland | 2.5% | 8.2% |
| Riverside | 4.3% | 14.4% |
| Sacramento | 4.4% | 14.7% |
| San Diego | 0.9% | 5.0% |
| San Francisco | 0.3% | 0.6% |
| San Jose | 1.4% | 4.5% |
Source: Redfin
