Average households need to earn at least $213,000 to buy a home
California became a bit more affordable during the fourth quarter, thanks to a dip in mortgage rates and stuck-in-a-rut home prices.
The keyword is a bit.
Fewer than one of five households could buy a home during the final three months of the year – and those who could needed annual income of $213,000, according to the California Association of Realtors.
It’s the latest chapter of an all-too-familiar story – very few households can afford a home in California.
AFFORDABILITY PLUMMETS AS THE MONEY NEEDED TO BUY SOARS
CAR found 18% of households could buy the median-priced home in the October-December period, compared to 17% in the third quarter – and 16% a year earlier (see table, below). But perhaps even more head-turning is that 56% of the state’s households could buy in 2012, a peak reached following the housing collapse that helped prompt the Great Recession.
The household income needed to buy has almost doubled in five years, and most hardworking folks have not enjoyed a huge increase in their paycheck. So, the dream of homeownership has become a challenge – if not impossible – for many Californians.
The affordability crisis has a far-reaching effect, said CAR president Tamara Suminski, a Southern California broker who had an op-ed appear in McClatchy-owned newspapers in the state. (See the op-ed in The Sacramento Bee.)
“Homeownership is not simply an asset; it is one of the most effective ways to provide true housing security, reduce economic disparities, build generational wealth and foster stable, thriving communities,” Suminski said. “But today, that dream is slipping out of reach. More than 80% of California families cannot afford to purchase a median-priced home … In comparison, however, wages have barely budged.”
‘MILLIONS OF CALIFORNIANS REMAIN PRICED OUT OF HOMEOWNERSHIP’
CAR has asked for the governor and state lawmakers to take numerous actions to boost affordability, from blocking corporate investors from buying homes to forward-looking programs such as the California Housing Finance Agency’s Dream For All, a shared-appreciation loan program for first-time homebuyers.
They are just some of the many actions are needed to help wanna-be homeowners, who face a critical shortage of homes on the market coupled with near-record prices statewide.
On the Central Coast – Santa Barbara to Santa Cruz counties – and in much of Southern California fewer than 15% of households can buy.
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In many of the counties in the Central Valley and the Far North — from about Chico to the Oregon border – affordability has dropped to less than 40%. Several years ago, more than half of households could buy in these regions.
“Buyers who entered the market in November 2020 realized major equity gains, while millions of Californians remain priced out of homeownership,” Suminski said in the op-ed. “The widening gap between incomes and the cost of housing is not just a household concern, it is a threat to California’s long-term economic stability. When essential workers can’t afford to live in the communities they serve, communities suffer … Communities thrive when the people who serve them can put down roots and participate fully in civic life.”
Affordability rate by county for Q4 2025
| City/County | Q3 affordability rate | Household income needed | Monthly mortgage payment |
|---|---|---|---|
| California | 18% | $213,200 | $5,330 |
| Bakersfield | 33% | $97,600 | $2,440 |
| Fresno | 33% | $105,600 | $2,640 |
| Los Angeles | 13% | $230,400 | $5,760 |
| Orange | 14% | $342,400 | $8,560 |
| Redding | 37% | $90,800 | $2,270 |
| Riverside | 19% | $165,600 | $4,140 |
| Sacramento | 30% | $132,000 | $3,300 |
| San Diego | 15% | $243,600 | $6,090 |
| San Francisco | 21% | $441,200 | $11,030 |
| San Jose | 21% | $470,800 | $11,770 |
| San Luis Obispo | 14% | $222,000 | $5,550 |
| Stockton | 31% | $132,400 | $3,310 |
Source: California Association of Realtors
Luxury home prices increase as listings decline
Pity the rich, they just can’t find a quality house.
So, they are willing to pay more – sometimes above the asking price – for multimillion-dollar homes in just the right neighborhood. And that has created an interesting market for luxury homes.
While affordability for everyday folks is near a record-low (see above), higher-income buyers are paying top dollar.
Luxury home prices — considered the top 5% of sales — increased 7.2% compared to a year ago in California, according to Redfin.
BIDDING WARS FOR SOME MULTIMILLION-DOLLAR HOMES
A critical shortage of available luxury homes has increased prices – that supply and demand thing — but slowed sales.
“Super-wealthy buyers are hesitant to pull the trigger because there’s not a lot of great inventory and they don’t want to settle,” said Alin Glogovicean, a Redfin Premier real estate agent in Los Angeles. “We’re seeing bidding wars on the few homes that are desirable, which is driving up prices. If you list your house for $2.9 million and it’s in really good shape and in a desirable location, you might sell it for $3.3 million and get a buyer who pays cash and waives contingencies.”
The Bay Area had the biggest annual price increase of luxury homes at 9.9%, with a state-leading 12.8% in San Jose (see table, below). San Francisco luxury prices were up 10%, while Oakland had a more middle-of-the-road 6.9% increase.
The Sacramento region – from Davis to El Dorado Hills and Granite Bay – had the smallest increase in luxury prices at 2.8%.
HURRY UP, IT’S ONLY MONEY
Now, luxury home sales were a mixed bag, with five of the eight cities posting gains, including a 24% jump in San Francisco. Down the road in San Jose, high-end sales dropped by 24%.
The Bay Area has the fewest high-end listings, greatly increasing the demand for homes. Luxury homes sold in about two weeks in Oakland and San Jose, and in a month in San Francisco.
In other regions of the state, luxury homes are sitting on the market for about two months. Still, a rather fast deal for homes that cost a couple to several million dollars.
Luxury home prices increase in the past three months
| Metro | Sales price | % compared to a year ago | Home sales compared to a year ago |
|---|---|---|---|
| Anaheim-Irvine | $4.97 million | +6.9% | +9.2% |
| Los Angeles | $4.4 million | +7.2% | +4.6% |
| Oakland | $2.9 million | +6.6% | -4.9%% |
| Riverside | $1.72 million | +7.0% | +5.3% |
| Sacramento | $1.74 million | +2.8% | -10.5% |
| San Diego | $3.85 million | +4.1 | +3.0% |
| San Francisco | $7.17 million | +10.0% | +24.1% |
| San Jose | $5.63 million | +12.8% | -24.5% |
Source: Redfin
Lower mortgage rates boost loan activity but refis rule
A drop in mortgage rates generated a greater-than-expected increase in mortgage activity during the fourth quarter.
But the boost in activity was largely connected to a rise in refinancing by homeowners who bought the past few years and were looking to lower the monthly mortgage payments.
In the eight largest metro regions in California, refis accounted for 44% of the 142,031 mortgages issued in the September through December period, according to ATTOM Data. All eight regions had an increase in refis compared to a year ago, including a 71% jump in San Jose.
“Loans, particularly for new purchases, typically slow down in the fourth quarter as fewer people are buying houses,” said Rob Barber, CEO of ATTOM. “But this year, that seasonal slowdown was offset by a rise in refinancing, likely driven by the steady drop in mortgage rates, which have been some of the lowest we’ve seen since 2022.”
A MIXED BAG OF MORTGAGE ACTIVITY
San Jose, thanks largely to the huge refinance activity, had a 28% increase in mortgages during the fourth quarter compared to a year ago. More than half of the home loans issued during the quarter were refinancing mortgages, easily the largest percentage in the state.
Three of the eight regions – Bakersfield, Fresno and Riverside – endured a drop in mortgage activity during the fourth quarter from a year ago. The three markets also had the smallest gain in mortgage activity in the state, from a barely noticeable 0.4% in Bakersfield to a rather pedestrian 10% in Riverside.
The three markets are also the most affordable in California, and many recent homeowners may not have enough equity to refinance – or they could even be upside down on their mortgages.
Nationwide, about 1.72 mortgages were issued during the final quarter of 2025, a 6% decline from the third quarter and about the same as a year ago. Loans for home purchased dropped 13% from a year ago, while refis increases 11%.
Bottom line: Lower rates are attracting current homeowners, but they are not low enough to lure home shoppers to make a purchase.
Refis account for many mortgages issued in Q4 2025
| City | All mortgages issued Q4 2025 | % compared to a year ago | Refis issued Q4 2025 |
|---|---|---|---|
| Bakersfield | 3,880 | -5.8% | 1,506 |
| Fresno | 3,890 | -6.8% | 1,515 |
| Los Angeles | 50,705 | +12.5% | 21,708 |
| Riverside | 24,631 | -1.2% | 10,724 |
| Sacramento | 13,655 | +1.3% | 5,688 |
| San Diego | 16,513 | +15.6% | 7,222 |
| San Francisco | 19,828 | +11.4% | 8,838 |
| San Jose | 8,929 | +27.5% | 4,794 |
Source: ATTOM Data
