In California, the dream of homeownership is increasingly out of reach for many, as median home prices far exceed what the average household can afford.

A recent analysis highlights the stark gap between incomes and housing costs across the state’s major metropolitan areas.

The California Association of Realtors’ Housing Affordability Index reveals that only 15% of households in California could afford a median-priced home in Q2 2024, down from 17% a year earlier.

To afford a median-priced home of $900,000, a household needs an annual income of at least $225,000, assuming a 20% down payment and a 30-year fixed-rate mortgage at 6.8% interest.

However, the median household income in California is just $85,300, creating a significant affordability barrier.

• San Francisco Bay Area: Median home price reached $1.4 million, requiring an income of $350,000. Only 12% of households can afford a home here, with a median income of $115,000.

• Los Angeles: Median price at $850,000 demands an income of $212,500, while the median household income is $81,000. Affordability is at 14%.

• San Diego: Homes cost $975,000, needing an income of $243,750. Median income is $90,000, with 13% affordability.

• Sacramento: More affordable at $540,000, requiring $135,000 income. Median income is $78,000, with 25% affordability.

• Riverside-San Bernardino: Median price of $600,000 needs $150,000 income. Median income is $70,000, with 20% affordability.

Rising interest rates, limited housing supply, and high construction costs continue to push prices upward.

The state’s housing shortage, estimated at 1.2 million units, exacerbates competition, particularly in coastal regions.

While Sacramento and Riverside offer relatively better affordability, even these areas remain challenging for median-income households.

The affordability crisis is reshaping California’s demographics, pushing younger workers and families to more affordable states like Texas and Arizona.

This outmigration could strain the state’s economy, which relies on a diverse workforce. Meanwhile, low-income households face the brunt, with only 8% able to afford a starter home statewide.