Southern California House Hunters Face Affordability Pinch: $73,000 Pay Bump Needed in Two Years

The dream of owning a home in Southern California is becoming increasingly out of reach for many residents, as a recent report reveals that a staggering $73,000 pay bump was needed in the past two years just to remain qualified to buy a median-priced home in the region. This significant increase in income requirements has pushed affordability levels to lows not seen since before the Great Recession.

According to data from the California Association of Realtors, the median-priced, existing single-family house in Southern California reached $775,000 by the end of 2023, marking a 7 percent increase since the end of 2021. Additionally, the average mortgage rate soared to 7.4 percent from 3.3 percent, resulting in a substantial rise in estimated monthly house payments from $3,350 to $5,180 over the two-year period.

The decline in affordability is evident in the Realtors’ affordability rate, which indicates that only 14 percent of households in the region could qualify to buy a home by the end of 2023. This measurement considers factors such as mortgage payments, property taxes, insurance, and a 20 percent down payment, with no more than 30 percent of income allocated towards housing costs.

The situation is even more dire statewide, with California buyers needing an income of $223,000 to qualify for a median-priced home of $833,000, up $75,000 from two years ago. Affordability levels dropped to 15 percent from 25 percent at the end of 2021, with the Bay Area facing the highest income requirements in the state.

In Southern California, areas such as Orange, San Diego, Los Angeles, Ventura, Riverside, and San Bernardino all experienced significant increases in income requirements to qualify for homes, with affordability rates plummeting compared to 2021 figures.

Despite a recent dip in mortgage rates to around 6.7 percent, the prospects of homeownership in Southern California remain bleak. The competition elsewhere in the nation is comparatively less daunting, with the typical American needing $105,000 to qualify for a median-priced home, up $38,000 from 2021.

As the housing market continues to present challenges for prospective buyers, the future of homeownership in Southern California remains uncertain. The impact of these affordability issues is evident in the historically low home sales in the region over the past two years, highlighting the pressing need for solutions to address the growing financial stress faced by house hunters.