One of California’s many socioeconomic divisions is homeownership.
California has the nation’s second-lowest percentage of residents living in homes that they or their families own — 55.5%, one percentage point higher than New York. But those owners are sitting on immense equity, roughly $2 trillion, thanks to the state’s highest-in-the-nation home prices.
Last month, the median price of single-family home in California was $868,150, according to the California Association of Realtors, more than twice the national median.
“Monthly payments for a newly purchased mid-tier home — including mortgage, taxes and homeowners’ insurance — have increased dramatically over the last couple of years,” the nonpartisan Legislative Analyst’s Office noted in a recent report. “Payments for a mid-tier home were nearly $6,000 a month in June 2024 — an 84% increase since January 2020. Payments for a bottom-tier home were over $3,600 per month — an 89% increase since January 2020.
“Annual household income needed to qualify for a mortgage on a mid-tier California home in June 2024 was about $239,000 — over two times the median California household income in 2022 ($95,500),” the report continued.
There is, as with other economic indices, a very strong racial component to California homeownership.
Public Policy Institute of California researchers this week declared that “persistent racial homeownership gaps run deep across the state — and these gaps have contributed to substantial wealth disparities across demographic groups.
“In 2023,” PPIC fellows Marisol Cuellar Mejia, Hans Johnson and Julien Lafortune continued, “Latino homeownership rate stood at 45.9%, or 18.5 points below that of white households. The Black homeownership rate was even more worrisome at 36.6%, or 27.9 points below the rate for white households. Meanwhile, at 61.5%, the rate among Asian Americans was only 3 percentage points below.”
Given the prominence of home equity in family net worth, the ownership gap strongly affects what economists call “generational wealth.”
Those who bought homes in California when they were cheap — as low as $25,000 for new houses a half-century ago — can bequeath many hundreds of thousands of dollars in equity to their offspring for down payments to continue the ownership cycle and thus build even more generational wealth.
Conversely, as prices increase, ownership becomes an increasingly forlorn dream for those on the other side of the real estate divide. Lacking six-digit incomes to qualify for mortgages, they must either remain renters or migrate to rural areas, where homes are still relatively inexpensive. Many leave for other states.
In September, median prices in California ranged from a high of $2.1 million in San Mateo County to $247,500 in remote Trinity County. Nationally, median prices are as low as $218,000 in West Virginia, which has the highest ownership rate, just shy of 80%. Texas and Florida, two populous states often considered California rivals, have much lower medians, $310,000 in the former and $418,000 in the latter.
So is there anything California could do to narrow the homeownership gap?
Given that it reflects persistent income disparities, there’s not a lot that could be done directly, PPIC researchers concluded.
“Over the longer term, addressing the underlying causes of income inequality, such as disparities in educational attainment and access to better jobs, can increase the odds of homeownership — and offer a pathway to building wealth,” Cuellar Mejia, Johnson and Lafortune wrote.
Vice President Kamala Harris has promised that, if elected president, she would provide up to $25,000 in down payment assistance for first-time homebuyers. While that might make a difference in states with low prices, such as West Virginia, it would be just a drop in the bucket in California, where $200,000 down payments are not unusual.
Moreover, it could result — as so many federal subsidies do — in just driving prices higher, with college loans being a prime example.
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CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more stories by Dan Walters, go to Commentary.
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I read these comments about how if you can’t afford it; you leave it. According to them, this is such a simple solution. Clearly, these people haven’t felt the pain of having roots in a place for decades or generations and then having to leave, abandoning their roots. Or go far enough, and your land of 14,000 was taken away by force. These comments add nothing to an important discussion of equity and show a lack of compassion. It also shows no understanding of a complex situation of inequality and access to fortune. Your luck today is a result of someone else’s unfortunate past. At least, recognize that.
If I couldn’t afford a home here I’d move to where I could. No complaints.
And that promise of handouts didn’t help Harris win at all. Probably hurt her.
If you can’t afford a home in a specific place, go find a place where you can, or just rent. Or find a way to get a job that makes more money. Not rocket science. Hey, I can’t buy a home in some places. Should I get an extra 25k? Nope. Simple as that.
Just about every time government gets involved with trying to “fix” a problem they often make it worse. As Walters mentioned, a good example of that is the student loan and subsidy programs where schools just raised their fees since students could afford to pay more with the available loans. One of the causes of high housing costs is the myriad of laws involved with building new housing. Unfortunately once in place it is very hard to back out of many of these various government programs because the bureaucracy running them works to keep them in place to preserve their own rice bowls. The answer is to unburden the population but the normal politician thinks about adding more laws to control the population.
All false.
availability of cheap housing loans drives up housing cost but availability of cheap education loans does not drive up education cost? Some men you just cant reach….
You do realize that housing and education are different things, right?
So true.
My husband and I jokingly tell people, home ownership in SB is like being in the Mafia, once in, you can never leave… and in our case, cannot even afford to move within the city.
Like so many other folks here, we were “grandfathered” in by family. Fortunate for sure, and as yet, we’ve not found a better place to live after many travels across this land.
We’re here to the end, and when gone, our heirs will take over, keeping the cycle of unattainability going on forever.
That happens so much around here. I vote for repealing Prop 13 and making the property tax/affordability game a little more fair, and I am saying this as someone whose grandparents grew up here.
The prices are set by supply and demand demand. There is nothing sinister going on here. There is no villain nor victim.
True. Some folks will always want to blame landlords or whoever makes more money than they do. Basic economics. You can’t have subsidies, tax breaks, and an “affordable house” for everyone who wants them where and when they want them.
So government subsidies have no effect on prices? What about monopolies? You sound like someone who has heard of Econ 101 but never took it. Prices are set by sellers. The law of supply and demand tells us what the price will be in an ideal free market where all sellers and buyers are infinitely rational, have perfect information, and there are no entry costs. Such markets only exist in textbooks.
Wrong. Prices are set buy the buyer. Something is only worth what another person is willing to pay. There is no monopoly on homes in the US.
This is obviously incorrect. Home prices are set by the seller 100% of the time. Negotiations may or may not adjust the price, sometimes down and sometimes up due to bidding wars, but in zero cases was the price set by buyers.
Oh the bliss of ignorance. “Sinister” is in the eye of the beholder. What’s legal for corporations to do is sometimes really harmful to individuals. And when individuals operate from a place of greed and selfishness I would call that sinister.
Last year there was a bill introduced in CA (I don’t know what became of it) to limit corporations and institutional investors from buying huge swaths of homes by out bidding first time buyers on a large scale. These corporations sit on empty properties, or rent them out short-term, until the shareholders deem the profit satisfactory. The practice artificially raises prices because of the scale and includes commercial properties as well. This is happening here and all over the country. It’s definitely *not* simply supply and demand!