Homeownership is one of the many ways that California’s social classes are split up.
California has the second-lowest number of people living in homes that they or their families own, at 55.5%. New York has the lowest percentage, by one percentage point. But those owners have a huge amount of equity—about $2 trillion—because home prices in that state are the highest in the country.
The California Association of Realtors says that the median price of a single-family home in California in September was $868,150. This is more than twice the national median price.
The nonpartisan Legislative Analyst’s Office said in a recent report that monthly payments for a recently bought mid-tier home have gone up a lot over the last couple of years. These payments include the mortgage, taxes, and homeowners’ insurance. “A mid-range home cost almost $6,000 a month in June 2024, which is 84% more than in January 2020.” A bottom-tier house cost more than $3,600 a month, which is 89% more than in January 2020.
“In June 2024, the annual household income needed to qualify for a mortgage on a mid-range California home was about $239,000. This was more than twice the median California household income of $95,500,” the study said.
There is a strong race element to California homeownership, just like there is to other economic indicators.
Researchers from the Public Policy Institute of California recently found that there are “persistent racial homeownership gaps run deep across the state.” These gaps have led to big differences in wealth between different groups of people.
In 2023, the PPIC fellows Marisol Cuellar Mejia, Hans Johnson, and Julien Lafortune wrote, “the Latino homeownership rate was 45.9%, which is 18.5 percentage points less than the white homeownership rate.” Even worse was the fact that 36.6% of Black households, or 27.9 percentage points less than white families, owned their own homes. The rate for Asian Americans, on the other hand, was only 3.5% lower, at 61.5%.
The ownership gap has a big impact on what analysts call “generational wealth” because home equity is such a big part of a family’s net worth.
People who bought homes in California when they were cheap—as little as $25,000 for a brand-new home fifty years ago—can leave their children and grandchildren many hundreds of thousands of dollars in equity to use as down payments to keep the ownership cycle going and build even more wealth across generations.
On the other hand, as prices rise, those on the other side of the real estate split find it harder and harder to realize their dream of owning a home. Since they don’t make enough money to qualify for mortgages, they have to either keep renting or move to rural places, where homes are still more affordable. A lot of them go to other places.
In September, the middle price of a home in California went from $2.1 million in San Mateo County to $247,500 in Trinity County, which is very far away. Median prices are as low as $218,000 across the country in West Virginia, which has just under 80% homeownership. The typical price in Texas is $310,000 and in Florida it is $418,000. These are two populous states that are often seen as competitors to California.
So, what could California do to help more people buy their own homes?
PPIC experts came to the conclusion that there isn’t much that could be done directly because it shows that income gaps are still there.
In the long run, Cuellar Mejia, Johnson, and Lafortune wrote that fixing the problems that lead to wage inequality, like differences in education levels and access to better jobs, can make it easier for people to buy their own homes and help them get rich.