California’s allure is undeniable with its hundreds of miles of pristine coastline, year-round sunny weather, numerous national parks, top-tier cuisine, and robust job market. However, these benefits come at a steep price. Living in California is notoriously expensive, featuring the highest gas prices in the nation at $5 a gallon and some of the steepest costs for groceries and dining out. A recent study by RealtyHop highlights just how challenging it is for locals to afford homes, even with typically higher state salaries. Astonishingly, California claims three of the five least affordable housing markets in America.
Los Angeles Tops the List
Los Angeles has emerged as the most unaffordable city in the U.S. for homebuyers. RealtyHop‘s analysis indicates that average families earning the median income in L.A. must now allocate an overwhelming 99.33 percent of their earnings to homeownership costs. This includes mortgage payments, property taxes, and insurance. RealtyHop’s study involved calculating average home prices in each city and the typical mortgage payments against the median family income.
Methodology and Findings
The study’s methodology is straightforward: it identifies the least affordable cities as those where the largest portion of monthly income goes toward mortgage payments. In L.A., this means virtually all of a median family’s income is swallowed up by home costs. The analysis uses median family income figures, which represent the earnings of two adults, highlighting even greater difficulties for single-income households.
Affordability, generally defined as spending no more than 30 percent of income on housing, is a distant dream for many. Homebuyers in 88 major U.S. cities, seven more than in April, would need to spend beyond this threshold.
Is homeownership affordable or possible for the average American family?
RealtyHop Housing Affordability Index
Other California Cities on the List
Following Los Angeles, Irvine in Orange County ranks third. In Irvine, families with average incomes must dedicate 85 percent of their earnings to homeownership costs, which include not just the mortgage but also property taxes and insurance. Irvine’s appeal is strong due to its status as one of the safest U.S. cities, its proximity to beaches, and amenities like the new $2 billion mall. The average home price in Irvine is $1.475 million, higher than L.A., but so are the salaries, partially explaining the steep housing costs.
Long Beach, another coastal city south of L.A., ranks fifth. Here, the average home costs $800,000, and families need to spend 70 percent of their income to afford these homes. Although Long Beach homes are cheaper than those in L.A. or Irvine, lower average salaries contribute to its high rank on the unaffordability scale.
Other Notably Unaffordable Cities
Outside of California, Miami, Florida, ranks second in unaffordability. Although it was once the most unaffordable city in the U.S., falling home prices have slightly improved the situation. The median list price in Miami is now $710,000, requiring an average family to spend $4,378 monthly on a mortgage.
New York City holds the fourth spot. Here, a family earning the median income would need to spend 76.63 percent of their earnings on homeownership, with the median home price listed at $850,000.
A Broader View on Housing Costs
In the 25 least affordable housing markets across the country, homeowners need to allocate at least 49 percent of their income to homeownership costs. Notably, four of the top five least affordable markets—Los Angeles, Irvine, New York City, and Long Beach—became even more expensive in May. Conversely, housing costs also rose in more affordable markets, including Toledo, OH; Detroit, MI; Fort Wayne, IN; Wichita, KS; and Buffalo, NY.
Conclusion
The RealtyHop study underscores the critical housing affordability crisis in California, particularly in Los Angeles, Irvine, and Long Beach. Despite higher incomes in these areas, the escalating home prices and associated costs render the dream of homeownership increasingly elusive for many residents. This trend highlights the need for comprehensive housing policy reforms to address the growing affordability gap in these and other U.S. cities.
