Small gains in Q4 2025 still left most Californians priced out
Moderating prices and slightly lower borrowing costs gave California homebuyers a rare bit of relief in late 2025, but ownership still remains an option for fewer than one in five households, according to new data from the California Association of Realtors.
C.A.R.’s Traditional Housing Affordability Index showed that 18% of California households could afford the $869,300 median‑priced single‑family home in the fourth quarter of 2025, up from 17% in the prior quarter and 16% a year earlier.
The share of households able to buy a typical condo or townhome rose to 28%, helped by a $650,000 median price and an annual income requirement of $159,200.
Income bar still sat above $200,000
C.A.R. reported that “a minimum annual income of $213,200 was needed” to manage a monthly payment of $5,330 on a 30‑year fixed mortgage at 6.35%, including taxes and insurance. That income hurdle remains more than double the national benchmark, where 39% of US households could afford a $414,900 median‑priced home requiring $101,600 in annual income.
The association said moderating home prices and “cooling market competition lowered borrowing costs and allowed more Californians to qualify for mortgages.” The effective interest rate declined for the third straight quarter to 6.35%, its lowest level since the third quarter of 2022, as markets priced in Federal Reserve rate cuts and volatility in longer‑term yields.
Even with that improvement, the index’s 18% reading is still less than one‑third of its 56% peak in 2012, underlining how far affordability has eroded over the past decade.
Pockets of relief, pockets of extreme stress
C.A.R. said 47 counties posted quarter‑to‑quarter improvements, while only three declined and three were unchanged.
Lassen County was the most affordable market, with 57% of households able to buy a median‑priced home and a minimum qualifying income of $56,000.
Mono County ranked as the least affordable at 10%, while coastal markets such as Monterey and Santa Barbara required incomes of at least $226,400.
San Mateo stood out with a minimum qualifying income of $507,600, the only county above the half‑million mark.
California’s sales rebound in October 2025 highlighted how demand picked up even before rates eased more meaningfully, with existing single‑family sales climbing to their highest level since February.
Separate reporting on national conditions found that affordability is expected to improve only gradually in 2026, with First American’s Mark Fleming pointing to income growth outpacing price gains as a key driver, rather than a rapid drop in mortgage rates.
A slow turn in a historically tight market
C.A.R. noted that housing affordability “stayed near its all‑time low and continued to be a challenge for both buyers and sellers,” even as late‑year rate relief helped Trinity, Humboldt and Glenn counties notch some of the biggest year‑over‑year gains.
In earlier statements, the group forecast only a modest rebound in 2026 sales and prices, with affordability still described as tough despite better lending conditions and slightly more inventory.
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