Housing affordability slightly improved in California in the fourth quarter of 2025, as moderating prices and cooling market competition lowered borrowing costs and allowed more Californians to qualify for mortgages, the California Association of Realtors announced on Feb. 10.
Eighteen percent of California households could afford to purchase the $869,300 median-priced home in the fourth quarter of 2025, up from 17 percent in third-quarter 2025 and 16 percent in fourth-quarter 2024, according to CAR.
Those trends were mirrored in the Southland, where the Los Angeles metro area improved to 17 percent from the third quarter, and from 15 percent in the fourth quarter of 2024. In Los Angeles County as a whole, the affordability number was 13 percent in the fourth quarter, up from 12 percent the previous quarter and 12 percent one year earlier.
Orange County saw its number increase to 14 percent, up from 13 percent in the third quarter and 12 percent in the fourth quarter of 2024. CAR estimated the average monthly home payment including taxes and insurance in Los Angeles County was $5,760 in the fourth quarter, with a minimum qualifying income of $230,400.
For Orange County, the average monthly home payment was $8,560, with a minimum qualifying income of $342,400. The statewide fourth-quarter 2025 figure is less than a third of the affordability index peak of 56 percent in the fourth quarter of 2012.
Factors contributing to the decline include the effective interest rate dropping for the third consecutive quarter to its lowest level since third-quarter 2022. The average effective interest rate receded to 6.35 percent in fourth-quarter 2025 from 6.67 percent the previous quarter and was 41 basis points below the level 6.76 percent recorded a year earlier.
Mortgage rates, which oscillated throughout the first six months of 2025 due partly to tariff-induced uncertainty, trended modestly lower in the second half of the year as the Federal Reserve’s expected rate cuts kick-started the decline.
The median price of an existing single-family home declined for the second straight quarter in the fourth quarter of 2025, falling 2.2 percent statewide as market competition cooled, typical for the year-end period.
Analysts said home prices should remain soft for the next couple of months but could rebound as the homebuying season begins in late March/early April. Compared with California, 39 percent of the nation’s households could afford to purchase a $414,900 median-priced home, which required a minimum annual income of $101,600 to make monthly payments of $2,540, CAR said.