California Housing Affordability Improves In Q4

Housing affordability in California improved modestly in the fourth quarter of 2025, compared to both the previous quarter and a year earlier, offering some relief to prospective buyers following a prolonged stretch of worsening conditions, according to new data from California Association of Realtors (CAR).

The organization's Traditional Housing Affordability Index showed that 15% of California households could afford to purchase the state's median-priced single-family home in the fourth quarter, up from 14% in the third quarter and 14% in the fourth quarter of 2024. While the increase was slight, it marked a step in the right direction after affordability reached near-historic lows amid elevated mortgage rates and home prices.

The median price of an existing single-family home in California declined on both a quarterly and annual basis, helping improve affordability. At the same time, mortgage rates eased modestly from recent peaks, reducing borrowing costs for homebuyers and contributing to improved purchasing power.

Despite the improvement, affordability remains significantly constrained by historical standards. CAR noted that the minimum annual income required to qualify for the purchase of a median-priced home remained well above six figures, underscoring the continued financial barriers facing many households in the state.

Regional variations were also evident, as more affordable inland areas offered relatively better access to homeownership compared to high-cost coastal markets, where elevated home prices continue to limit affordability for most buyers. Still, affordability gains were seen across multiple regions as price moderation and slightly improved financing conditions took effect.

CAR officials emphasized that while the latest data signals progress, broader affordability challenges persist. Limited housing supply, elevated home prices relative to incomes, and still-high mortgage rates continue to restrict access for many first-time buyers.