How do people afford homes in California? Insider Secrets from People Who Have Bought Homes!

California is known for its beautiful weather and lots of people from different cultures. With the median home price in California hovering around $700,000, many people wonder how do people afford homes in California. This article will talk about why houses cost so much in California and how some people buy them. Whether you’re buying a home for the first time or finding it tough, this article can help you understand California’s housing.

California Housing Market Overview

  • Median home price: $700,000 (2023)
  • Demand: High, driven by the state’s attractive climate, renowned landmarks, breathtaking natural surroundings, and strong economy
  • Supply: Limited, leading to skyrocketing home costs and soaring property demands
  • Market shift: Median sale price decreased by 9.01% in April 2023, but California Association of Realtors forecasts a significant increase in home sales next year
  • Forecast: 22.9% increase in home sales to 327,100 units in 2024
  • Factors contributing to sales increase: Desire to live away from the city in suburbs and rural regions, willingness to pay top dollar for homes
  • Housing affordability: The median home price in California is significantly higher than the median household income, making it difficult for many people to afford to buy a home.
  • Government policies: The California government has implemented a number of policies to address the housing affordability crisis, such as building more affordable housing units and providing tax breaks to first-time homebuyers.

How do people afford homes in California: 20 ways

  • Family Money: Many people in California receive help from family members to buy a home.
  • High Income: A high income is necessary to afford a home in California. According to [source], a family needs to make around $130,000 per year to afford a median-priced home in coastal California.
  • Low-Income Assistance Programs: Agencies such as CalHFA offer mortgage loans designed for low-to-moderate-income borrowers.
  • Saving for a Down Payment: Saving for a substantial down payment can decrease monthly payments and make it easier to afford a home. Assistance programs typically cover some or all of the down payment and closing costs.
  • Improving Credit Score: Improving your credit score can help you qualify for a mortgage with a lower interest rate.
  • Determining an Affordable Location: The income level needed to buy a home in California varies depending on factors such as size, location, and type of property. Determining where you can afford to live in California can help you make a more informed decision.
  • Consider a Fixer-Upper: Buying a fixer-upper can be a more affordable option for those looking to buy a home in California. However, it’s important to factor in the cost of repairs and renovations.
  • Look for First-Time Homebuyer Programs: Many programs are available to help first-time homebuyers in California, such as the CalHFA MyHome Assistance Program.
  • Consider a Co-Borrower: Having a co-borrower with a higher income or better credit score can increase your chances of getting approved for a mortgage and can make it easier to afford a home.
  • Shop Around for the Best Mortgage Rates: Shopping around for the best mortgage rates can save you thousands of dollars over the life of your loan. It’s important to compare rates from multiple lenders and consider factors such as closing costs and fees.
  • Consider a Longer Mortgage Term: A longer mortgage term, such as a 40-year mortgage, can lower monthly payments and make it easier to afford a home.
  • Look for Homes Outside of Major Cities: Homes outside of major cities in California tend to be more affordable than those in urban areas.
  • Consider a Condo or Townhouse: Condos and townhouses can be more affordable than single-family homes in California.
  • Take Advantage of Low Interest Rates: Low interest rates can make it easier to afford a home in California by lowering monthly mortgage payments.
  • Negotiate with Sellers: Negotiating with sellers can help you get a better deal on a home in California.
  • Consider a Home Equity Loan: A home equity loan can provide additional funds to help you afford a home in California.
  • Look for Homes in Up-and-Coming Neighborhoods: Homes in up-and-coming neighborhoods may be more affordable than those in established neighborhoods.
  • Consider Renting Out a Room: Renting out a room in your home can provide additional income to help you afford a home in California.
  • Take Advantage of First-Time Homebuyer Tax Credits: First-time homebuyers in California may be eligible for tax credits that can help them afford a home.
  • Consider a Co-Signer: A co-signer can help you qualify for a mortgage if you don’t meet the income or credit requirements on your own.

Affordable Places to Buy Homes in California

  1. Bakersfield: Bakersfield is one of the cheapest places to buy a house in California, with a median home price of $310,000.
  2. Eureka: Eureka is another affordable city in California, with a median home price of $350,000.
  3. Clearlake: Clearlake is located in Lake County, around 110 miles north of San Francisco, and has a median home price of $221,967.
  4. Fresno: Fresno is a larger city with a population of 549,000, but it remains one of California’s cheapest places to buy a house, with a median home price of $510,326.
  5. Oxnard: Oxnard is a coastal city of 200,000 located about an hour northwest of Los Angeles, with a median home price of $634,900.
  6. Stockton: Stockton is located in the Central Valley and has a median home price of $450,000.
  7. Chico: Chico is a small city located in Northern California, with a median home price of $424,500.

These cities offer relatively more affordable housing options compared to some of the more expensive areas in California, making them attractive options for homebuyers looking to live in the state while managing their housing costs.

Alternative Housing Options When Unable to Buy in California

How do people afford homes in California
How do people afford homes in California
  1. Buying a Condominium or Townhome: Condominiums and townhomes are often less expensive than single-family homes and can be a good alternative for those who want to own property.
  2. Buying a Multi-Family Home: Purchasing a multi-family home, such as a duplex or triplex, can be a good investment opportunity. You can live in one unit and rent out the others to help cover the mortgage.
  3. Accessory Dwelling Unit (ADU): An ADU is a small, self-contained living unit that is built on the same lot as a single-family home. ADUs can be used as rental units or as a separate living space for family members.
  4. Renting: Renting a home or apartment is always an option, and it may make more financial sense depending on your location and lifestyle.
  5. Seller Financing: Seller financing is a formal arrangement where the property seller serves as your lender. This approach can be less costly than a traditional mortgage, since homebuyers have more freedom to negotiate terms.
  6. Rent-to-Own: A rent-to-own agreement allows you to lease a property and eventually buy it straight from the landlord. This approach can be a great option if you are looking to buy a house without a mortgage.
  7. Alternative Housing: There are several alternative housing options, such as container homes, tiny homes, yurts, housing cooperatives, RVs or vans, and houseboats.

10 factors that can affect home affordability in California

  1. Location: Desirable areas like San Francisco, Los Angeles, and San Diego tend to have higher home prices, making homes in these locations less affordable.
  2. Income: Higher incomes can make it easier to afford more expensive homes, while lower incomes may limit housing options.
  3. Credit Score: A higher credit score can lead to lower mortgage interest rates, improving long-term affordability.
  4. Debt-to-Income Ratio: Lenders consider this ratio when approving mortgages, and a lower ratio is generally more favorable for affordability.
  5. Housing Market Conditions: High demand and low supply can drive up home prices, negatively impacting affordability.
  6. Interest Rates: Lower interest rates lead to lower monthly mortgage payments, increasing affordability.
  7. Down Payment: A larger down payment can reduce monthly mortgage costs, making homes more affordable.
  8. Property Taxes: Higher property taxes can add to the overall cost of homeownership, affecting affordability.
  9. Homeowner’s Insurance: Higher insurance premiums can increase the ongoing cost of owning a home.
  10. Maintenance and Repair Costs: Frequent maintenance or repair expenses can impact the long-term affordability of a home.

These factors interact in complex ways, and individuals should consider their unique financial situation and priorities when assessing home affordability in California’s dynamic real estate market.

Government Programs to Assist Homebuyers in California

  1. California Housing Finance Agency (CalHFA): CalHFA offers a variety of loan programs to help homebuyers and first-time homebuyers purchase a home in California. These programs include first mortgage programs, down payment assistance programs, and government loans such as FHA, VA, and USDA loans.
  2. CalVet Home Loans: CalVet Home Loans is a program for veterans to buy a home in California.
  3. Community Contacts: Some communities in California offer homeownership assistance programs. Check with your local government to see if there are any programs available in your area.
  4. Habitat for Humanity: Habitat for Humanity is a nonprofit organization that builds and rehabilitates houses for families in need.
  5. HUD-Approved Housing Counseling Agencies: HUD-approved housing counseling agencies offer homebuyer education courses and counseling services to help first-time homebuyers navigate the home buying process.
  6. National Homebuying Fund Down Payment Assistance: This program offers down payment assistance to eligible homebuyers.
  7. County-Specific Programs: Many counties in California offer homebuying programs and homeownership education classes and training. Check with your local government to see if there are any programs available in your county.

Down Payment Guidelines for Homebuyers in California

Here are the guidelines for down payments on homes in California, based on different types of loans:

  1. Conventional Loans: Most conventional loans require a down payment of at least 20% of the purchase price. For example, if you want to buy a home for $500,000, you would need to save $100,000 for the down payment.
  2. FHA Loans: FHA loans are government-backed loans that require a down payment of at least 3.5% of the purchase price. For example, if you want to buy a home for $500,000, you would need to save $17,500 for the down payment.
  3. CalHFA Loans: CalHFA offers down payment assistance programs that can help reduce the amount of money you need to save for a down payment. For example, the MyHome Assistance Program offers a deferred-payment junior loan of up to 3.5% of the purchase price or appraised value to assist with down payment and/or closing costs.
  4. Other Programs: Other programs, such as the California Dream for All Shared Appreciation Loan, provide funding up to 20% of the home’s sales price to help with the down payment.

Average Home Down Payments in California

  1. Bankrate: According to Bankrate, the median down payment in California was over $100,000 as of March 2022.
  2. SoFi: SoFi reports that the median down payment on a house in the US was 13% in 2022, which would mean most people are putting down about $50,544 for a down payment on a median-priced home.
  3. MoneyGeek: MoneyGeek reports that most homebuyers will need a 20% down payment to get a mortgage in California. According to a 2022 study, the average price of a home in California is $765,495, which would require a down payment of $153,099.
  4. Sammamish Mortgage: Sammamish Mortgage reports that the median down payment on single-family homes purchased with financing in Q1 2023 was $26,250, down 16% from the previous quarter.

Hence, the average down payment for a home in California can range from tens of thousands of dollars to over $150,000, depending on the location and the type of loan.


In conclusion, affording a home in California can be a formidable challenge due to its high median home prices relative to income levels. To overcome this hurdle, individuals and families employ various strategies, including financial assistance from family, higher incomes, government assistance programs, and creative financing options like co-borrowers and longer mortgage terms. Moreover, seeking homes in more affordable regions within the state and exploring alternative housing solutions are viable approaches to realize the dream of homeownership in California’s competitive real estate market.

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