By Vanguard Staff
California’s housing affordability crisis has deepened, with fewer households able to qualify for a mortgage compared to three years ago, even as the rest of the nation also faces declining affordability. A new analysis by the Mercury News shows the Golden State slipping further behind the national average, underscoring the growing gap between California’s housing market and the rest of the country.
Only 15 percent of California households could afford to purchase a home in the second quarter of 2025, according to data from the California Association of Realtors. That compares to 34 percent of households nationwide. In 2022, the figures were 16 percent for California and 38 percent nationally, highlighting that, while affordability is shrinking everywhere, California remains far less accessible than the rest of the nation to would-be buyers.
The median-priced home in California this spring was $905,680. To qualify, buyers needed an annual household income of $232,400 — an increase of $33,200, or 17 percent, since 2022. Nationally, the U.S. median home price was $429,400, requiring an income of $110,400. That figure has grown by $17,200, or 18 percent, over the same period.
The decline in affordability is tied directly to rising interest rates. The analysis assumed a mortgage rate of 6.9 percent in 2025, compared to 5.4 percent in 2022. Affordability calculations are based on households spending 30 percent of their income on housing costs, including principal, interest, property taxes, and insurance, with a 20 percent down payment.
That means a California household needs about $181,000 in cash to make the down payment on a median-priced home. Nationally, the required down payment is roughly $86,000. Those upfront costs create an additional barrier for buyers who are already struggling with high housing prices and limited supply.
Lansner noted that the Federal Reserve’s decision to end its cheap money policy in early 2022, as well as its halt on mortgage bond purchases, has pushed rates higher. During the pandemic, the Fed nearly doubled its mortgage bond holdings to $2.7 trillion to stabilize the housing market. With that support gone, interest rates rose, making monthly payments significantly more expensive. At the same time, home prices have continued to inch up — rising 3 percent statewide in California and 4 percent nationwide over the past three years.
The picture varies across regions of California. In the Bay Area, the median home price was $1.4 million this spring, requiring an annual income of $359,200 and a down payment of $280,000. Thanks to a 6 percent decline in prices since 2022, affordability has improved slightly, with 20 percent of households able to qualify, compared with 18 percent three years ago.
In Southern California, the median home price climbed 6 percent to $850,000, requiring an income of $218,400 and a $170,000 down payment. Affordability in the region worsened, with only 14 percent of households qualifying compared to 17 percent in 2022.
The analysis highlights that while California faces unique pressures due to its high housing costs, the broader national trend also points toward a worsening affordability crisis. With mortgage rates elevated, down payments rising, and incomes struggling to keep pace, fewer households across the country are able to enter the housing market.
The ongoing gap between California and the nation raises questions about the state’s long-term economic health, as workers, families, and even middle-income professionals find themselves priced out of homeownership. Economists warn that these trends may contribute to outmigration, reduced economic mobility, and increased pressure on policymakers to address affordability.
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