Just 15% of homebuyers could afford a median-priced home in Q4 2024
California’s housing affordability took another hit in the fourth quarter of 2024 as higher mortgage rates and elevated home prices continued to squeeze buyers, according to the latest data from the California Association of Realtors® (C.A.R.).
Only 15% of homebuyers in the state could afford a median-priced, existing single-family home in Q4 2024—down from 16% in Q3 2024 and matching the affordability level from a year ago, according to C.A.R.'s Traditional Housing Affordability Index (HAI). That figure stands in stark contrast to the affordability peak of 56% in Q4 2012.
Rising mortgage rates have played a significant role in dampening affordability, with borrowing costs remaining near historic highs. Since October, rates have been trending upward and are expected to fluctuate in the coming months as the market reacts to policy decisions from the new White House administration.
The Federal Reserve signaled at its January meeting that it will maintain its current stance on interest rates, adopting a "wait-and-see" approach. With no immediate rate cuts on the horizon, mortgage rates are likely to remain elevated.
Homebuyers face high costs
A minimum annual income of $222,000 was required to qualify for a median-priced single-family home in California, which was valued at $874,290 in Q4 2024. Assuming a 20% down payment and an effective 6.76% mortgage rate, the typical monthly payment – including principal, interest, taxes, and insurance (PITI) – was $5,550.
Though the effective mortgage rate fell from 7.39% in Q4 2023, affordability remains constrained.
"While moderate price growth will ease the affordability crunch that buyers face, elevated mortgage rates, however, will continue to be a challenge for many in the next couple of quarters," the report noted.
The statewide median price for a single-family home dipped 0.7% quarter-over-quarter, largely due to seasonal factors and shifts in the sales mix. However, on a year-over-year basis, home prices rose 4.9%, marking the sixth straight quarter of price increases. That’s an acceleration from the 4.3% annual growth recorded in Q3 2024.
As the housing market moves through the slower winter months, inventory is expected to rise, potentially leading to further softening in home prices. Still, affordability constraints remain as high borrowing costs continue to weigh on buyers.
Condo affordability
For California’s condo and townhome market, affordability declined slightly in Q4 2024, with 24% of buyers able to purchase a median-priced unit, compared to 25% in the prior quarter. The median price for a condo/townhome stood at $670,000, requiring an annual income of $170,000 to afford a typical $4,250 monthly payment.
Read next: New Orleans welcomes the Super Bowl – but can residents reap the benefits?
In contrast, affordability at the national level was significantly higher. More than one-third (36%) of US households could afford a median-priced home of $410,100, requiring an annual income of $104,000 and a monthly payment of $2,600. This marks the seventh consecutive quarter where California’s required income to afford a home was more than double the national level.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
