Construct it – and they’ll fall.
We’re typically advised that California housing prices will dip if extra residences are constructed. My trusty spreadsheet’s peek into actual property and demographic patterns, nonetheless, questions the knowledge behind building as a big housing-cost containment measure.
You possibly can start with housing creation throughout the state, as measured by the California Division of Finance.
The state’s housing provide grew by 556,000 in the course of the previous 5 years – a seemingly meek enchancment above the 435,000 of the earlier 5 years. However the statewide inhabitants decreased by 9,000 in the identical timeframe, in keeping with state statistics. Distinction this slight dip with the 725,000 achieve from 2015 to 2020.
The current building tempo ought to have helped home hunters and condominium seekers. But, value aid was virtually nonexistent regardless of fewer Californians competing for residences.
Home-hunt horrors
Take into consideration a calculation of the annual earnings required to purchase a typical California home. It’s almost doubled in 5 years.
That’s evaluating California Affiliation of Realtors’ homebuying affordability knowledge for the primary quarter of 2025 to the ultimate three months of 2019, simply earlier than the coronavirus disrupted the financial system.
To start out 2025, a minimal annual earnings of $218,000 was vital to purchase a median-priced house. This customary surged 82% for the reason that finish of 2019. The Realtor yardstick assumes consumers spend 30% of their earnings primarily based on a mortgage with a 20% down cost, with a further 1.4% of the acquisition worth going towards property taxes and insurance coverage.
A big problem for home hunters was mortgage charges. They had been 6.93% in early 2025, in contrast with 3.89% in late 2019.
And don’t forget pricing. California’s median house gross sales worth elevated by 40% over the previous 5 years to $846,830. The place did that demand come from?
Geographically talking, Southern California is taken into account “cheaper,” in keeping with this math.
The area’s home hunters confronted a required earnings of $213,600 – up 97% in 5 years. That pay qualifies somebody for the $830,000 median residence, which is 51% pricier than in 2019.
However these wants differ among the many counties. Orange’s $373,200 requirement has elevated by 129% in 5 years. Then there’s San Diego at $266,800, up 107%, Los Angeles at $222,000, up 83%, Riverside at $164,800, up 99%, and San Bernardino at $128,800, up 106%.
Throughout the Bay Space, wage calls for are much more extreme.
You’ll want $334,400 to purchase – up 84% in 5 years. That will get you the $1.3 million median residence, up 41% since 2019.
By county, San Mateo’s $561,600 requirement was up 84% in 5 years. Santa Clara is at $520,000, up 112%, Marin is at $424,800, up 63%, San Francisco is at $418,800, up 33%, and Alameda’s $334,400 is an 88% soar.
Troubled tenants
Think about that California renters additionally face calls for of six figures.
Ponder hire knowledge from Zillow, which tracked the stress on tenant funds within the nation’s 50 largest metro areas. California is house to 5 of the eight U.S. markets the place incomes of $100,000 or extra enable the hire test to stay at a manageable 30% of the native median earnings.
Begin with the standard renter within the Inland Empire, who must earn $102,722 this yr . That’s the eighth-highest burden among the many 50 metros.
Worse nonetheless, this monetary hurdle for Riverside and San Bernardino counties has expanded by 46% in 5 years. The one bigger jumps nationally had been in Miami (54%), Tampa (52%), and Windfall, Rhode Island (51%).
Or ponder San Diego County, the place its $122,810 threshold was the fifth-largest nationally. This monetary burden elevated by 41% over 5 years, the ninth-largest soar among the many 50 metros.
In Los Angeles and Orange counties, the $118,958 threshold ranked No. 6 among the many 50. The 28% soar in 5 years was No. 38.
Within the San Jose metro space, $136,532 was the usual – the nation’s highest. Nevertheless, this hire burden elevated by solely 13% over the 5 years.
That was the second-smallest advance, simply forward of the 9% enhance in San Francisco. Its $124,267 earnings threshold was the fourth highest nationally.
What’s happening?
Nicely, there’s “luxury” housing building, buyers, short-term leases, trip houses, and poor coverage choices to debate one other day.
As a substitute, concentrate on my actual property mantra: “Jobs. Jobs. Jobs.”
A modest California hiring spree offered quite a few staff the means to afford the pricier housing – whether or not owned or rented.
Statewide, 520,000 jobs had been added within the final 5 years – however that was far slower hiring than the 1.9 million jobs created within the earlier 5 years.
And wages decidedly perked up.
Over the previous 5 years, Southern California bosses paid 28% extra – the largest hike amongst 15 U.S. job markets tracked by the federal Employment Price Index. Raises totaled 19% in the course of the earlier 5 years.
Within the Bay Space, 22% wage hikes from 2020 to 2025 ranked No. 10 nationally, representing a rise from 17% for the earlier 5 years.
Bear in mind, the pandemic made roommates unappealing. And these paycheck pops motivated others to strike out on their very own. Each tendencies created housing demand regardless of stagnant inhabitants progress.
That’s why the standard California family had 2.76 folks in January 2025, down from 2.86 5 years earlier. All 58 counties had a dip in housing density.
Not alone
Exploding housing burdens aren’t simply Golden State insanity.
There’s the $103,600 wanted for a U.S. home buy. This requirement has elevated by 92% over the previous 5 years. It buys an American a median residence price $402,300, which is 46% pricier than in 2019.
And a typical U.S. tenant should earn $80,949 to maintain the hire at 30% of earnings. That burden grew 35% in 5 years.
Initially Revealed: Could 19, 2025 at 7:04 AM PDT
