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California Housing Affordability Update for Q3 2025

In the latest report from the California Association of Realtors (C.A.R.), it has been revealed that more Californians have the financial capacity to purchase homes in the third quarter of 2025 compared to the previous quarter and the same timeframe last year. Specifically, 17% of households in California can now afford the median-priced single-family home, which stands at $887,380. This reflects an increase from 15% in the previous quarter (Q2 2025) and 16% from Q3 2024.

The increased affordability is attributed to several factors, including a cooling competitive market and an uptick in available housing supply. As reported, the minimum annual income necessary for potential buyers to afford this median-priced home is approximately $223,600, allowing for monthly payments of around $5,590 when accounting for principal, interest, taxes, and insurance on a 30-year fixed mortgage at an interest rate of 6.67%.

For those looking at condos or townhomes, the situation is similarly optimistic, with 27% of homebuyers able to afford the median price of $649,990, requiring a minimum annual income of $163,600 to manage monthly payments of about $4,090. This is a notable rise from 25% affordability recorded both in the previous quarter and the same quarter last year.

Market Dynamics

The C.A.R. report highlighted that California's housing affordability still remains close to its historical lows, with the index pegged at levels significantly lower than the peak of 56% noted in Q3 2012. The affordability index reflects the percentage of households capable of affording the median-priced home. Despite improvements, housing affordability remains a major hurdle for many potential buyers.

Interestingly, the third-quarter figure illustrates that while certain counties have shown quarter-to-quarter improvement, there remain areas where affordability has declined. Furthermore, the average effective interest rate for mortgages has slightly decreased to 6.67% from 6.90% in the previous quarter, reflecting the lowest rate seen in over a year.

Amidst this backdrop, the monthly payments for median-priced homes still exhibit year-over-year increases, highlighting that while borrowing costs have dipped, they remain near historically high levels. In particular, the report noted that the statewide median home price has moderated by 2% when compared to the previous quarter, yet it has increased by 0.8% compared to the same period last year.

County-Specific Insights

Analyzing the affordability at a county level indicates a mixed bag; Lassen County, for example, has retained the title of the most affordable region in the state, with 52% of households capable of affording a home, necessitating the lowest minimum qualifying income of just $64,800. In stark contrast, Mono County ranks as the least affordable, with only 7% of households able to purchase a home, requiring an income upwards of $271,600.

The market conditions, alongside slight decreases in mortgage rates and property prices, may signal a potential for improved affordability in the coming months, depending on whether these trends hold consistent.

As the housing market heads into the off-season, the expectation is that home prices will ease further, particularly if mortgage rates remain favorable. Overall, while small gains in housing affordability are commendable, significant challenges lie ahead for both buyers and sellers in navigating California’s complex real estate landscape.

In summary, while a modest rise in home purchasing capability among California households could provide some hope for prospective buyers, it is imperative to acknowledge the broader challenges that continue to shape affordability in the state's housing market.