The Soaring Cost of Homeownership in Southern California: A $73,000 Pay Raise Needed to Buy Median-Priced Homes

The cost of buying a home in Southern California has skyrocketed in the past two years, making it increasingly difficult for families to achieve the American Dream of homeownership. According to the Orange County Register, a typical family now needs to earn $73,000 more than they did in 2021 to afford a median-priced house, which now sits at $775,000.

Not only have home prices increased by 7 percent since late 2021, but the average mortgage rate has more than doubled to 7.4 percent, significantly raising monthly payments. The typical buyer now faces a monthly payment of $5,180, up from $3,350 just two years ago.

The affordability rate for homebuyers has plummeted, with only 14 percent of households in Southern California able to qualify for a mortgage late last year, compared to 26 percent in late 2021. This measurement considers that no more than 30 percent of a buyer’s income should be spent on housing costs, not including the hefty 20 percent down payment required.

The situation is even more dire in the Bay Area, where buyers need to earn $223,000 to qualify for a typical $833,000 home. In Orange County, households must earn $348,000 to afford a $1.3 million home, while in Los Angeles County, the required income is $236,000 for an $884,000 home.

Overall, only 16 percent of homes in California were considered affordable last year, down from 21 percent in the previous year and a stark contrast to a decade ago when 50 percent of homes were within reach for buyers.

With home prices continuing to rise and affordability reaching crisis levels, many families are finding it increasingly challenging to make their homeownership dreams a reality in Southern California.