Most new homebuyers in California have a $4,000-plus mortgage payment

The state has eight of the 10 priciest housing markets in the U.S.

Higher mortgage rates and fast-rising home prices are creating a financial crunch for home shoppers, as the cost of buying – and keeping – a house soared during the second quarter.

And Californians are getting hit the hardest, with eight of the 10 least affordable housing markets nationwide in California, according to ATTOM Data. All eight, including second-place San Mateo County, are in the Bay Area, from Napa to Santa Cruz.

But being able to buy a house has become an increasing challenge regardless of where you live in the state, from Crescent City to San Diego. 

A tale of three cities — and hefty mortgage payments

THE FEDERAL RESERVE COOLS THE MARKET BY LIMITING THE SUPPLY OF EXISTING HOMES FOR SALE

The Federal Reserve’s effort to cool inflation has iced the market, as homeowners hold off selling and giving up their near-record-low mortgage rates – and manageable monthly payments – for 6.5%-plus rates during the past year. 

With few available homes, buyers are competing for homes, if they can even find one, and paying close-to-record high prices. For most hard-working Californians, home price increases have outpaced wage gains during the past year.

Home shoppers are dealing with a fearsome foursome of higher prices, increasing mortgage rates, a limited supply of homes and the reality that even bigger paychecks are failing to narrow the gap.

“The U.S. housing market has done an about-face following a downturn that threatened to usher in an extended period of flat or falling prices. With that has come another blow to how much house the average worker around the country can afford,” says Rob Barber, CEO of ATTOM. “Whether this is just a temporary blip amid this year’s peak buying season or a sign of another extended price surge is anyone’s guess. But any predictions of a market demise were certainly premature – and house hunters are feeling the pinch.”

Average mortgage payment in the second quarter compared to a year ago and before COVID

CityAvg. mortgage payment Q2 2023% increase from Q2 2022 (a year ago)Avg. mortgage payment pre-COVID
Anaheim$5,362+7%$3,245
Bakersfield$1,877+9%$1,064
Fresno$2,095+7%$1,233
Los Angeles$4,433+4%$2,695
Riverside$3,200+6%$1,809
Sacramento$2,696+1%$1,624
San Diego$4,485+8%$2,584
San Francisco$7,651+1%$5,824
San Jose$7,952+7%$4,695
Santa Barbara$4,409+14%$2,462
Santa Cruz$6,170+5%$3,420
Sonoma$4,390+12%$2,690
Ventura$4,347+5%$2,624

Source: ATTOM Data

HOME PRICES EASILY OUTPACE WAGE GAINS IN MOST CALIFORNIA CITIES

While home prices are lower than a year ago in 12 of 13 markets surveyed in the state, they have increased for three straight quarters. And monthly mortgage payments – what many homebuyers consider more than the price – have jumped 6.6% in California.

Three of every four markets had a monthly payment of at least $4,000 – including almost $8,000 in San Jose and $7,650 in San Francisco. And new homebuyers in three of four markets spent at least 50% of their income to make the monthly mortgage payment during the second quarter, easily exceeding the recommended 30% rate by financial experts. ATTOM determines affordability based on a 20% down payment for the median-priced home in each region, with a debt-to-income ratio of 28%. 

Another recent report found that almost half of the nation’s 30 cities with the most house-poor residents – regardless of when they bought – were in California, including Los Angeles in second place behind only Hialeah, Fla. The state’s median home price increased to more than $800,000 for the second consecutive month in May, according to the California Association of Realtors.

Despite the climbing costs, consumers are clamoring for homes.

“Homes are going into contract almost immediately,” says Michael Simonsen, President of Altos Research. “There’s just not enough existing homes to buy.”

The average percent of wages needed to buy compared to the historic payment

City% of wages to buy in
Q2 2023
Historic % of wages needed to buy
Anaheim84%63%
Bakersfield41%29%
Fresno47%35%
Los Angeles68%52%
Riverside69%48%
Sacramento44%32%
San Diego70%52%
San Francisco58%60%
San Jose57%44%
Santa Barbara83%61%
Santa Cruz117%84%
Sonoma76%60%
Ventura79%61%

Source: ATTOM Data