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While it became slightly easier to afford a home in California at the end of 2025, the state remains one of the nation’s toughest housing markets — especially in San Mateo and Santa Clara counties, which again ranked as the priciest places to buy a home, according to a new housing affordability report from the California Association of Realtors.
To afford a median-priced home of $2.07 million in San Mateo County, buyers need a minimum qualifying annual income of $507,600, the report found. That would cover estimated monthly payments of $12,690, including principal, interest, taxes and insurance on a 30-year fixed-rate mortgage, assuming a 20% down payment and a 6.35% interest rate.
Since the end of 2023, San Mateo County has remained the only county in California where buyers must earn more than $500,000 annually to afford a median-priced home.
Santa Clara County ranked just behind, with buyers needing a minimum annual income of $470,800 to afford a median-priced home of $1.92 million, including estimated monthly payments of $11,770. San Francisco County followed, with a minimum qualifying income of $441,200.
Despite those steep income requirements, affordability improved slightly in both Peninsula counties. In San Mateo County, 19% of households could afford a median-priced home at the end of 2025, up from 17% a year earlier. In Santa Clara County, 21% could afford a home, compared with 19% the previous year.
Statewide, affordability improved in most counties, with 47 of 53 posting gains compared with a year earlier.
The report attributes the modest gains to lower mortgage rates, rising incomes and slightly softer home prices. The average effective mortgage rate fell for the third consecutive quarter to 6.35%, its lowest level since mid-2022. Rates fluctuated earlier in 2025 amid economic uncertainty but trended downward in the second half of the year as expectations of Federal Reserve rate cuts helped ease borrowing costs, the report shows. California also recorded its first annual home price decline since early 2023, with prices falling 0.6% compared with the same period a year earlier.
Statewide trends
Despite the recent improvements, affordability remains historically low in California. According to the report, 18% of households statewide could afford to purchase a median-priced, single-family home of $869,300, up from 16% a year earlier. That figure is still far below the state’s affordability peak of 56% in the fourth quarter of 2012.
To afford a median-priced home, California buyers need a minimum annual income of $213,200 to cover estimated monthly payments of $5,330, including principal, interest, taxes and insurance. That amount remains more than double the national average and has exceeded $200,000 in 12 of the past 13 quarters.
Affordability was somewhat better for condos and townhomes. Twenty-eight percent of California households could afford a median-priced condo of $650,000 in the fourth quarter, up from 25% the previous year, with an annual income requirement of $159,200.
Nationwide, more than one-third (39%) of households could afford to purchase a median-priced single-family home of $414,900, which required a minimum annual income of $101,600 and estimated monthly payments of $2,540. California’s required income has exceeded the national level for seven consecutive quarters.
Least- and most-affordable counties
Mono, Monterey and Santa Barbara counties were the least affordable in California, according to the index, which measures a household’s ability to purchase a home based on local income levels. Only 10% of households in Mono County could afford a median-priced home, compared with 12% in Monterey and Santa Barbara counties. Buyers in each of those markets needed a minimum income of $226,400.
Lassen County remained the most affordable, with 57% of households able to afford a median-priced home, followed by Trinity (44%) and Tuolumne (43%). Lassen also required the lowest minimum qualifying income at $56,000 and was the only county in the state with an affordability index above 50%.
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