Only 14% of California’s median-priced single-family homes can afford them

In a recent conversation with a representative from the California Association of Realtors, we gained insight into the persistent challenges homebuyers are facing in California. Their latest report reveals that home prices in the state surged by 9% in the second quarter compared to the same time last year. Alarmingly, only 14% of prospective buyers can afford a median-priced single-family home in California, a decrease from 17% in the first quarter of this year. For comparison, in the second quarter of 2012, a significant 56% of potential buyers could afford a home.

To put this in perspective, to afford the median home price of $906,600, buyers would need an annual income of at least $236,800. This figure is based on a 20% down payment and a 7.1% fixed interest rate on a 30-year mortgage, resulting in monthly payments (including taxes and insurance) of around $5,920.

Looking at the national picture, about 33% of households can afford a median-priced home, which is currently valued at $422,100. For these buyers, a minimum annual income of $110,000 is necessary to cover monthly mortgage payments of roughly $2,750.

When we zoom in on specific counties, the situation is even more concerning. Only 16% of homebuyers in San Mateo and Santa Clara counties could afford their respective median-priced single-family homes in the second quarter of this year. This marks a slight decline from 17% at the start of the year and 18% from the previous year.

In San Mateo County, a household needs to earn at least $574,800 to buy a home at the county’s median price of $2.2 million, with monthly payments (including taxes and insurance) hitting about $14,370 under the current lending criteria. Similarly, in Santa Clara County, an annual income of at least $524,000 is required for homes with a median price of $2 million, translating to monthly payments of around $13,100.

Currently, San Mateo and Santa Clara counties are the only regions in California where an income exceeding $500,000 is necessary to afford a home. Marin and San Francisco are close behind, requiring annual incomes of $469,200 and $444,000, respectively.

The affordability index in the report sheds light on the various challenges different counties face regarding homeownership. When examining individual purchasing power relative to local average incomes, Mono, Monterey, and Santa Barbara counties rank as the least affordable in California.

In Mono County, just 5% of residents can afford local housing, making it the most unaffordable area in the state, followed by Monterey at 8% and Santa Barbara at 9%. The report indicates that to purchase a median-priced home in these counties, a minimum annual income of at least $267,600 is necessary.

However, not every area in California is beyond the reach of the average buyer. Lassen County, situated in Northeast California, stands out as a more affordable option, with 52% of its residents able to afford the median home price of $249,950, making it the most affordable county in the state. Additionally, Glenn County in the Central Valley reports that 35% of residents can purchase homes, followed closely by Del Norte and Tehama counties, both at 34%.