Despite homeownership still being out of reach for many people, some of California’s most expensive housing markets are beginning to show early signs of cooling, according to a new affordability analysis by Zillow.
While major cities, such as Los Angeles and San Diego, are still far from affordable by traditional standards, the share of income required to afford a typical mortgage in these markets is expected to decline by the end of this year, according to Zillow.
Although slight, this notable shift comes after years of worsening affordability.
In this case, affordability means a mortgage payment on a typical house that doesn’t require more than 30% of the median household income. When housing costs rise above the 30% mark, they become a financial burden, leaving less for other essentials.
In the Los Angeles area, a home is usually valued at $942,285, with a projected monthly mortgage payment of around $5,697, according to Zillow. This totals to 67.3% of the median household income or affordability.
By the end of this year, Zillow expects affordability to fall to 65.4%.
San Diego shows a similar trend. A home is typically valued at $916,964, with a monthly mortgage payment of $5,538. This equates to 57.6% of median household income, which is projected to decline to 56.2% by the end of the year.
Similarly, in San Francisco, a home is valued at just over $1.10 million, with a monthly mortgage payment of $6,766. This amounts to 56.8% of the median household income, which is expected to fall to 53.5% by the year’s end.
Other California cities show a similar trajectory. Sacramento’s share of income spent on a mortgage is estimated to fall from 41.2% to 39.3%, while Riverside will see mortgage payments slipping from 45.2% to 44.3%. In San Jose, the share will decline from 63.2% to 60.2%.
However, even with these projected declines, housing in California’s big cities continues to be well above the 30% affordability threshold, according to the study.
While California’s housing market is one of the least affordable in the U.S., the projections suggest that some of the most expensive cities in the state may be stabilizing instead of worsening.
Other Cities Far From Affordable
Other major cities, like New York, Boston, and Seattle, are also expected to be far from affordable, by Zillow’s standards. Despite projected easing of mortgage payments, it is still considerably higher than the 30% threshold.
In New York, a home is typically valued at $703,649, with a monthly mortgage payment of $4,833. This is equal to 55.4% of the median household income. By the end of the year, affordability is estimated to fall to 53.9%.
In Chicago, a home is valued at $336,642, with a monthly mortgage payment of $2,404. This totals to 30.4% of the median household income, which is projected to fall to 29.7% by the end of the year.
At the national level, a mortgage payment currently takes 32.6% of median household income, the best affordability reported across the U.S. since August 2022. This is expected to improve to 31.8% by the end of the year.
The only major metro expected to see affordability worsen this year is Hartford, which Zillow predicts will be among the hottest markets.
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