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Fewer Californians can afford to buy a median-priced home in the state.
A newly released study by the California Association of Realtors shows that housing affordability dipped last year as interest rates jumped and the typical mortgage payment for a median-priced home increased. Less than 1-in-5 Californians earned the minimum qualifying income needed to purchase a median-priced home in California last year, down from just over 1-in-5 from 2022.
To qualify for a home with the state’s median price tag of $813,980 in 2023, California homebuyers needed a minimum annual income of $204,800. Their monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $4,190, assuming a 20% down payment and an interest rate of 6.66%
The study shows that housing affordability fell for all ethnic groups across the state.
Only 21% of white/non-Hispanice households could afford a median-priced home compared to 23% in 2022. Just 9% of Black and Hispanic/Latino households could afford a median-priced home in 2023, down from 11% for both groups in 2022. In 2023, 28% of Asian homebuyers could afford a median-priced home compared to 32% in 2022.
“There’s a notable difference in housing affordability for Black and Hispanic/Latino households. Interest rates are not moving down as soon as we originally thought they would,” Eileen Giorgi, president of the Silicon Valley Association of Realtors, said. “The homeownership gap and disparity in wealth for households of color could worsen if rates stay elevated this year.”
San Mateo County
In San Mateo County, 17% of residents earned the minimum qualifying income of $493,200 needed to purchase a $1.96-million median-priced home last year. Their monthly payment would be $10,079, assuming a 20% down payment and an interest rate of 6.66%. Housing affordability for White/non-Hispanic households was 19%; Asian households 20%; Hispanic/Latino households 10%; and Black households 8%.
Santa Clara County
In Santa Clara County, 20% of residents earned the minimum qualifying income of $444,400 needed to purchase a $1.76-million median-priced home in 2023. Housing affordability for White/non-Hispanic households was 21%; Asian households 25%; Hispanic/Latino households 8%; and Black households 9%.
Housing affordability gaps by county
Housing affordability gaps narrowed last year but remained wide as interest rates continued to climb while home prices stayed relatively flat. The affordability gap between Black households and the overall population in California improved from 9.7 percentage points in 2022 to 8.5 percentage points in 2023, and the gap for Hispanic/Latino households improved from 9.6 percentage points in 2022 to 8.9 percentage points in 2023.
Of the major counties for which the California Association of Realtors tracks affordability by ethnicity, the affordability gap between Black households and the overall population in 2023 was largest in Contra Costa (-15%), San Francisco (-15%) and Fresno (-13%) counties. Other counties that had a double-digit affordability gap for Black households included Alameda (-12%), Santa Clara (-10%) and San Mateo (-10%).
For Hispanic/Latino households, the affordability gap was the biggest in Santa Clara (-11%), Contra Costa (-10%), Alameda (-9%) and Solano (-9%).
The affordability gaps between Black households and the overall population in the state and the nation were -9% and -14%, respectively. For Hispanic/Latino households, the gaps were -9% and -7%, respectively.
At 6%, San Francisco and San Diego were the least affordable counties for Black households. Kern County (located in the Central Valley) and San Joaquin County (about 90 miles inland from San Francisco), were the most affordable at 29% and 24%, respectively. The least affordable counties in 2023 for Hispanic/Latino homebuyers were Los Angeles (7%) and Orange County (7%), and the most affordable was Kern at 29%.
For Asian households, Orange County was also the least affordable, with 15% earning the minimum income required to buy a median-price home. Kern was the most affordable county with 55% of Asian households having the minimum income required to buy a median-priced home.
Orange County was the least affordable county for white/non-Hispanic households, with 16% earning the minimum income required to buy a median-price home. Fresno was the most affordable at 43%.
Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.