Buying a house became a bit more affordable during the third quarter in California, thanks to a brief drop in mortgage rates and smaller-than-expected price increases.
But the average buyer still needs to earn at least $220,000, based on a 20% down payment, an income level few earn in the state. The ability to buy a home in California comes with two challenges – the down payment and the monthly mortgage payment, which topped $5,500.
Only one of every six (16%) households can afford a home statewide, compared to 14% in the second quarter – and slightly improved from 15% a year ago, according to the California Association of Realtors. The affordability rate is far from the modern-day record high of 56% in third-quarter 2012, when many home prices were cut in half following the Great Recession and the market collapse.
Affordability rates ranged from a paltry 11% in Los Angeles and San Luis Obispo counties to more than 50% in Lassen County.
In an ongoing odd twist, one that started several quarters ago, the Bay Area has become more affordable than Los Angeles, at 21% to 15%. The difference is because of higher incomes in the Bay Area and, while more expensive, home prices in San Francisco to San Jose have increased at a much lower rate and even declined in several months.
Affordability rate by county for Q3 2024
| City/County | Q4 affordability rate | Household income needed | Monthly mortgage payment |
|---|---|---|---|
| California | 16% | $220,800 | $5,520 |
| Bakersfield | 30% | $101,600 | $2,540 |
| Fresno | 30% | $108,000 | $2,700 |
| Los Angeles | 11% | $237,600 | $5,940 |
| Orange | 12% | $350,800 | $8,770 |
| Redding | 34% | $96,800 | $2,420 |
| Riverside | 21% | $159,200 | $3,980 |
| Sacramento | 26% | $140,400 | $3,510 |
| San Diego | 12% | $253,600 | $6,340 |
| San Francisco | 21% | $496,400 | $9,910 |
| San Jose | 19% | $476,800 | $11,920 |
| San Luis Obispo | 11% | $236,000 | $5,900 |
| Stockton | 25% | $143,600 | $3,590 |
Source: California Association of Realtors
A MAJORITY OF INCOME FOR HOUSING IN SOME REGIONS
Another report has found just as dismal affordability in California, based on the median home price and household income by region. The average buyer in the state would need to spend about 61% of their income on the monthly mortgage, based on an aggregate of nine cities (see table, below) and a 20% down payment, according to ATTOM Data.
Financial advisers and housing experts say households should not spend more than 30% to 35% of their income on housing (mortgage or rent). Bakersfield and Fresno’s mortgage payments are the closest at 42% and 46%, respectively.
The average buyer in Orange County would need to spend 95% of their income on housing, the highest percentage in the state. Los Angeles, Riverside and San Diego counties were all above 70% — or double the level of being considered cost burdened, according to the Joint Center for Housing Studies of Harvard University.
Nationwide, the average buyer spends about one-third of their income on housing, slightly better than a year ago.
“The cost of owning a home across much of the nation remains a tough go for average workers, exceeding levels preferred by banks and other lenders,” says Rob Barber CEO of ATTOM. “But it is at least tracking in the right direction. That’s mainly because of declining interest rates.”
Income needed for monthly mortgage by city in Q3
| City | Median price | % year over year | Income to buy | % of income for mortgage |
|---|---|---|---|---|
| Bakersfield | $355,000 | +4% | $86,507 | 41.5% |
| Fresno | $392,000 | +2% | $93,561 | 46.3% |
| Los Angeles | $899,000 | +6% | $211,147 | 72.6% |
| Orange County | $1.16 million | +8% | $268,309 | 95.4% |
| Riverside | $605,000 | +5% | $145,699 | 70.2% |
| Sacramento | $525,000 | +4% | $125,093 | 45.3% |
| San Diego | $889,500 | +5% | $207,015 | 71.9% |
| San Francisco | $1.32 million | +2% | $315,157 | 52.4% |
| San Jose | $1.55 million | +5% | $360,069 | 55.7% |
Source: ATTOM Data Solutions
