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California’s housing crisis is worse now than at the start of this year when the number of households able to afford a home hovered at a near all-time low.
According to the California Association of Realtors’ newly released Traditional Housing Affordability Index, only 15% of California households earned the minimum income needed to purchase a median-priced single-family home in the second quarter of 2025, down from 17% during the first three months of the year. That figure represents a significant decline from the state’s affordability peak of 56% in the second quarter of 2012.
The bright side? The market is slightly better now than a year ago, when only 14% of households could afford a home.
San Mateo and Santa Clara counties remain the top two most-expensive markets in the state to buy a home. Once again, they are the only counties where homebuyers need to earn more than $500,000 annually to afford a median-priced home. Residents need to earn more than 2x the statewide average and about 5x the national average to buy homes here.
The report, which measures a person’s ability to afford a home compared to their income or the average income for their county or market, attributes elevated mortgage rates and near historic-high borrowing costs for playing a significant role in reducing affordability.
Mortgage rates shifted up and down in the first half of the year as tariff concerns fueled economic uncertainty, the report said. While slightly lower than in early 2025 and mid-2024, rates remain high, keeping borrowing costs close to record levels.
For a median-priced home, including taxes and insurance, the average monthly mortgage payment rose 6.6% from the previous quarter but was still 1.9% lower than a year ago, the report reveals.
“Over the next six months, rates are expected to ease as recent signs of weakness suggest that the economy will continue to slow in the third quarter of 2025 and possibly into fourth-quarter 2025,” the report said. “However, with the average effective tariff rate sharply higher than what it was late last year, and at the highest level since 1933, consumer prices will likely increase further, and inflation will become a bigger issue in the second half of the year. As such, the Federal Reserve could face a challenge between controlling inflation and boosting job growth in the coming months.”
Statewide
California’s housing market remains tough for buyers. The statewide median price of a single-family home climbed 6.9% from the start of the year, partly due to seasonal factors. But on a year-over-year basis, the state saw its first price drop in two years, as slower demand and improved supply softened prices. The median price slipped to $905,680, down slightly from $906,600 a year ago.
To afford that $905,680 home, buyers need a minimum annual income of $232,400 to make monthly payments of $5,810, including taxes and insurance on a 30-year, fixed-rate loan, assuming a 20% down payment and an interest rate of 6.9%, according to the report.
In comparison, more than a third (34%) of all households can afford a home nationwide.
For the ninth straight quarter, the income needed to buy a U.S. median-priced home is less than half that of California’s. A household earning $110,400 can afford a $429,400 home, with monthly payments around $2,760.
Condos and townhomes, however, are providing options for California buyers. In the second quarter of 2025, 25% of households could afford a typical condo or townhouse, up from 24% earlier this year and 22% a year ago. The median price for these properties was $670,000, requiring an annual income of $172,000 to cover monthly payments of about $4,300.
San Mateo and Santa Clara counties
In San Mateo County, to afford a median-priced home of $2.2 million, buyers need to earn a minimum qualifying income of $564,800 annually to make monthly payments of $14,120, including taxes and insurance on a 30-year, fixed-rate loan, assuming a 20% down payment and an interest rate of 6.9%, according to the report. Just 16% of households can afford a home, unchanged from both earlier this year and the same time in 2024.
In Santa Clara County, buyers need to earn $548,800 annually to afford monthly payments of $13,720 for a median-priced home of $2.138 million. Affordability held steady at 17% from earlier this year and ticked up slightly from 16% a year ago.
San Francisco County trails just behind with a minimum qualifying income of $459,200 for a median-priced home of $1.78 million.
Least- and most-affordable markets
High borrowing costs continue to make housing less affordable across much of California. According to the report, 23% of counties saw affordability either stall or decline compared to a year ago.
Lassen County, still the most affordable in the state, saw the sharpest decline, with the share of households able to buy a home falling from 52% to 46%. Tehama and Del Norte counties each dropped from 34% to 29%.
Despite higher home prices, 16 counties showed a quarter-to-quarter improvement in affordability as a result of slightly lower mortgage rates and higher levels of income.
In the state’s most-affordable counties, In Lassen, Glenn (39%) and Tuolumne (38%), nearly 2 in 5 households can afford a median-priced home. Lassen also continues to require the state’s lowest minimum qualifying income at $73,200.
Mono ranked as California’s least affordable county, with only 8% of households able to buy. Monterey and Santa Barbara followed at 10% each.
Even with slight improvements in some areas, overall affordability remains near record lows, creating challenges for both buyers and sellers, the report concludes.
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