California's housing affordability falls in Q2 as home prices rise

Housing affordability in California declined in the second quarter as mortgage rates and home prices increased, reversing some of the improvement seen earlier in the year, according to the California Association of Realtors.

Nineteen percent of California households could afford to purchase a median-priced existing single-family home in the second quarter, down from 22% in the first quarter but up from 17% a year earlier, the trade group said.

The second-quarter affordability rate remained far below the state's peak of 56% recorded in 2012, highlighting the persistent challenge of buying a home in California, the report said.

The average effective mortgage rate rose to 6.54% in the second quarter from 6.24% in the first quarter, marking the first increase in five quarters and the highest rate since the third quarter of 2025. The rate remained below the 6.90% average recorded a year earlier.

At the same time, California's median home price jumped 8.7% from the first quarter to $916,750. It was the first annual price increase after two consecutive quarters of declines, rising 1.1% from the second quarter of 2025, according to CAR.

A California household needed an annual income of $228,400 to afford the median-priced home in the second quarter, assuming a 20% down payment and a 6.54% effective mortgage rate. The estimated monthly payment, including principal, interest, taxes and insurance, was $5,710.

The required income remained above $200,000 for the 14th time in the past 15 quarters, according to the report.

Affordability also declined for condominiums and townhomes, although it remained better than a year earlier, CAR found. Thirty percent of households could afford the state's median-priced condo or townhome, down from 32% in the first quarter but up from 28% a year earlier.

The median condo or townhome price was $670,000, requiring an annual income of $166,800 to cover an estimated monthly payment of $4,170.

California remained significantly less affordable than the nation as a whole. Forty percent of U.S. households could afford a median-priced home of $434,900 in the second quarter, down from 44% in the first quarter and up from 38% a year earlier.

San Diego County continued to rank among the least affordable housing markets in California. Just 17% of households could afford the county's median-priced single-family home in the second quarter, unchanged from the first quarter and up slightly from 16% a year earlier.

The median San Diego County home price was $1.075 million, according to CAR. A prospective buyer needed an annual income of $268,000 to qualify for an estimated monthly payment of $6,700, including taxes and insurance. San Diego's affordability rate was below the statewide rate of 19% and the national rate of 40%.

Among major Southern California markets, Orange County was less affordable, with just 15% of households able to afford its median-priced home. Los Angeles County posted an affordability rate of 17%, while Ventura County was at 19%. Inland Empire households fared better, with 25% able to afford the region's median-priced home.

Across California, affordability declined from the first quarter in 44 of the 53 counties tracked by CAR. Four counties improved and five were unchanged.

Compared with a year earlier, affordability improved in 41 counties, declined in six and remained unchanged in six, the report found.

Lassen County was the state's most affordable market, with 50% of households able to afford a median-priced home, followed by Glenn County at 43% and Shasta County at 41%. Lassen also had the lowest minimum qualifying income at $69,600 and was the only county with a median home price below $300,000.

Mono County was the least affordable, with only 6% of households able to afford a median-priced home. Santa Barbara and Monterey counties each posted affordability rates of 12%.

San Mateo County had the state's highest minimum qualifying income at $579,600, followed by San Francisco at $535,600 and Santa Clara County at $510,800.

The San Francisco Bay Area had an overall affordability rate of 22%, while the Los Angeles metropolitan area was at 17% and the Inland Empire at 25%.

CAR said lower mortgage rates compared with a year earlier helped improve affordability in much of California. But the gains were uneven because rising home prices offset some of the benefit from lower borrowing costs.

Mortgage rates also became more volatile during the quarter amid geopolitical tensions, higher energy prices and renewed inflation concerns. A temporary easing in rates during early June provided some relief, but rates subsequently moved closer to 7%.

CAR's Traditional Housing Affordability Index measures the percentage of households that can afford to purchase a median-priced single-family home based on prevailing prices, mortgage rates and household income.

The organization said affordability remains near historic lows despite the year-over-year improvement, limiting homeownership opportunities for households across much of California.