Slower Home Price Gains Boost California Housing Affordability In First-Quarter 2025, C.A.R. Reports

Seventeen percent of the state's homebuyers could afford to purchase a median-priced, existing single-family home in California in first-quarter 2025, up from 15 percent in the fourth quarter of 2024 and unchanged from the first quarter of 2024, according to C.A.R.'s Traditional Housing Affordability Index (HAI). Housing affordability in California remained near its all-time low and continued to be a challenge for both buyers and sellers.

The first-quarter 2025 figure is less than a third of the affordability index peak of 56 percent in the first quarter of 2012. C.A.R.'s HAI measures the percentage of all households that can afford to purchase a median-priced single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The index is considered the most fundamental measure of housing well-being for home buyers in the state.

Mortgage rates rose to the highest level in three quarters amid growing economic uncertainty, keeping borrowing costs near their all-time highs. While the monthly minimum mortgage payment for a median-priced home (including taxes and insurance) slipped -1.8 percent from fourth-quarter 2024, it jumped 4.6 percent from first-quarter 2024, as the effective mortgage rate rose from both the previous quarter and the fourth quarter of last year.

A minimum annual income of $218,000 was needed to qualify for the purchase of a $846,830 statewide median-priced, existing single-family home in the first quarter of 2025. The monthly payment, including taxes and insurance (PITI) on a 30-year, fixed-rate loan, would be $5,450, assuming a 20 percent down payment and an effective composite interest rate of 6.93 percent. The effective composite interest rate was 6.76 percent in fourth-quarter 2024 and 6.86 percent in first-quarter 2024. Mortgage rates had been on the rise through the end of 2024, peaking just above 7 percent in mid-January before they began to moderate. Growing concerns of economic uncertainty, however, have created volatility in the past few weeks. Over the next quarter or two, rates may continue to fluctuate as the impact of trade policies enacted by the White House administration remains unclear. The Federal Reserve announced at their meeting this week that they are holding rates steady and will continue to evaluate the tariffs' effect on the economy in the months to come.

While the statewide median price of existing single-family homes in California declined 3.1 percent quarter-to-quarter, partly due to seasonal factors, the dip can also be attributed to a change in the mix of sales. On a year-over-year basis, California continued to record price increases for the seventh consecutive quarter, although price growth decelerated to 4.0 percent in first-quarter 2025, from 4.9 percent in the previous quarter. As the market moves further into the spring homebuying season, price growth is expected to remain solid as market competition heats up and housing supply tightens. However, higher levels of active listings not seen in the prior two years should help prevent the market from being overheated and may even slow down price growth in the buying season. While more moderate price growth will ease the affordability crunch that buyers face, elevated mortgage rates, on the other hand, will continue to be a challenge for many of them in the next couple of quarters.

The share of California households that could afford a typical condo/townhome in first-quarter 2025 remained steady at 24 percent, unchanged from the previous quarter and previous year. An annual income of $172,400 was required to make the monthly payment of $4,310 on the $670,000 median-priced condo/townhome in the first quarter of 2025.

Compared with California, more than one-third (37 percent) of the nation's households could afford to purchase a $402,300 median-priced home, which required a minimum annual income of $103,600 to make monthly payments of $2,590. Nationwide, affordability was unchanged from a year ago. In the first quarter of 2025, the nationwide minimum required annual income was less than half that of California's for the eighth consecutive quarter.

Key points from the first-quarter 2025 Housing Affordability report include:

• Compared to the previous quarter, housing affordability in the first quarter declined in 15 counties and remained unchanged in 12. However, 26 counties saw improved affordability due to slower home price growth and higher incomes, despite slightly higher mortgage rates. Year-over-year, affordability improved in 26 counties, while 20 experienced declines and 7 remained unchanged.
  
• Lassen (56 percent) remained the most affordable county in California, followed by Glenn and Tuolumne, where 40 percent of the households in those counties could afford to purchase the median-priced home in their county in the first quarter. Of all counties in California, Lassen continued to require the lowest minimum qualifying income ($60,400) to purchase a median-priced home in the first quarter of 2025.
  
• Mono (5 percent), was the least affordable county in California, followed by Santa Barbara (9 percent) and Monterey (10 percent) with each of them requiring a minimum income of at least $240,000 to purchase a median-priced home in the respective counties. San Mateo (16 percent) continued to require the highest minimum qualifying income ($561,600) to buy a median-priced home in first-quarter 2025. Together with Santa Clara (18 percent), they were the only two counties in California requiring a minimum qualifying income of over $500,000. Marin (20 percent) came in third with a minimum required income of $424,800.
  
• Although housing affordability improved in nearly half of all counties throughout the state due to higher household income and relatively slower home price growth, elevated mortgage rates and higher home prices overall continued to constrain improvements in affordability. As a result, housing affordability in 51 percent of the counties tracked by C.A.R. either remained unchanged or declined from the same quarter of last year. Tehama (33 percent) experienced the biggest drop in affordability, falling six points from first-quarter 2024. Imperial (25 percent) and Shasta (32 percent) followed closely, with each moving five points below last year.

See C.A.R.'s historical housing affordability data .
See first-time buyer housing affordability data .

Leading the way...® in California real estate for nearly 120 years, the CALIFORNIA ASSOCIATION OF REALTORS® ( ) is one of the largest state trade organizations in the United States with 200,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Sacramento.

Traditional Housing Affordability Indices (HAI) were calculated based on the following effective composite interest rates: 6.93% (1Qtr. 2025), 6.76% (4Qtr. 2024) and 6.86% (1Qtr. 2024).

SOURCE CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.)

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