California’s housing market showed signs of improvement in the third quarter of 2024, with more households finding it possible to afford a home. The latest report from the California Association of Realtors® (C.A.R.) reveals that both home price growth and mortgage rates have stabilized, giving buyers a bit of breathing room. However, despite these positive trends, affordability is still a struggle for many, especially in some of the state’s most expensive areas.

Key Highlights from Q3 2024

• Home Affordability: In Q3 2024, 16% of California households could afford to buy a median-priced single-family home, priced at $880,250. This is an improvement from 14% in the second quarter and 15% in the same period last year. While this uptick is encouraging, affordability is still well below its peak of 56% in 2012, when the market was at its most accessible.
• Condo/Townhome Affordability: A larger share of buyers could afford a median-priced condo or townhome. 25%of households were able to purchase a property priced at $670,000, which also shows an increase from last quarter (22%) and last year (23%).
• Mortgage and Income Requirements: To afford the median-priced single-family home, a buyer would need a minimum annual income of $220,800. Monthly payments for this home, including principal, interest, and taxes, would total $5,520 on a 30-year fixed mortgage with an interest rate of 6.63%.

What’s Driving Affordability?

Several factors have contributed to this modest improvement in affordability:

1. Slower Price Growth: Home prices in California increased by 4.3% year-over-year in Q3 2024. Although this is the slowest price growth in over a year, it still represents a significant challenge for many buyers, especially in high-demand areas.
2. Fluctuating Mortgage Rates: Mortgage rates started the quarter on a downward trend but have recently spiked back above 7%. This makes it harder for buyers to lock in favorable rates, but some slight relief has been seen due to temporary dips earlier in the quarter.
3. Regional Variations: Affordability isn’t the same everywhere. Rural areas like Lassen County saw a significant increase in affordability, with 52% of households able to afford a median-priced home. Meanwhile, in regions like San Mateo County, homebuyers need a minimum income of over $500,000 to afford a typical home.

A Snapshot of Regional Affordability

Here’s a closer look at housing affordability across California’s major regions and counties in Q3 2024:

Region/County	Median Home Price (Q3 2024)	Median Monthly Payment (PITI)	Minimum Income Needed	Affordability Index
California Statewide	$880,250	$5,520	$220,800	16%
Los Angeles Metro Area	$827,000	$5,190	$207,600	15%
San Francisco Bay Area	$1,275,000	$8,000	$320,000	21%
Inland Empire	$590,000	$3,700	$148,000	22%
United States (Nationwide)	$418,700	$2,630	$105,200	35%
San Mateo County	$2,050,000	$12,860	$514,400	17%
Lassen County	$262,500	$1,650	$66,000	52%

Looking Forward: Challenges and Opportunities

While more households are now able to buy a home than in the previous quarters, affordability in California remains a major hurdle for many. The combination of high home prices, rising interest rates, and limited inventory continues to squeeze potential buyers, particularly in the more expensive regions like the Bay Area and Southern California.

Despite this, there are signs that some areas will see a slight improvement in affordability in the coming months, especially as home prices stabilize and competition slows. However, with mortgage rates remaining volatile, prospective buyers should continue to tread carefully and stay informed about market conditions.

Sources:

• California Association of Realtors® (C.A.R.): Full Report – Housing Affordability Index (Q3 2024)

National Housing Affordability Data: National Association of Realtors®