The dream of homeownership in California is becoming increasingly elusive for many, as the latest report by the California Association of Realtors (CAR) reveals a concerning trend: statewide housing affordability hit a new low in 2023. Rising interest rates have propelled mortgage payments upward, making it difficult for families across all ethnic groups to afford homes.
According to CAR's report, only 18% of Californians earned enough to afford a median-priced home in 2023, a sharp decline from 21% in 2022. However, the burden of this affordability crisis weighs even heavier on Black and Hispanic/Latino households. In 2023, a mere 9% of these households could afford a median-priced home, down from 11% in the previous year.
The report highlights the widening gap in homeownership and wealth disparity among communities of color. "The significant difference in housing affordability for Black and Hispanic/Latino households illustrates the homeownership gap and wealth disparity for communities of color," CAR stated in the report.
The income inequality underlying these disparities is evident in Census Bureau data, with the 2022 median income for Black and Hispanic/Latino households significantly below the state average. Black households had a median income of $63,800, while Hispanic/Latino households earned $75,950, compared to $103,870 for White households and $120,630 for Asian households.
To put the staggering figures into perspective, affording a median-priced, single-family home in California, which is priced at $813,980, requires a minimum annual income of $204,800. This translates to a monthly payment of $4,190, including taxes and insurance, based on a 30-year fixed-rate loan with a 20% down payment and an effective composite interest rate of 6.66%.
The report also delves into county-specific data, revealing significant discrepancies in affordability. San Francisco and San Diego emerged as the least affordable for Black households, with an affordability index of only 6%, while Kern and San Joaquin counties were the most affordable. For Hispanic/Latino households, Los Angeles and Orange County ranked as the least affordable, with only 7% able to afford a median-priced home, whereas Kern County proved to be the most accessible.
Orange County stood out as the least affordable for Asian households, with only 15% meeting the income requirements for purchasing a median-priced home, whereas Kern County remained the most accessible.
As the economy slows and interest rates remain elevated in 2024, the challenges in achieving homeownership for Black and Hispanic/Latino communities could exacerbate further, accentuating the urgent need for targeted interventions to address the root causes of housing inequality in California.