Yahoo Finance California's $900,000 Median Home Price Means The California Dream Is Officially Dead
The California Association of Realtors (CAR) recently announced that the state's median home price had crossed $900,000 for the first time. Prospective California homebuyers will likely receive that news as fondly as ants at a picnic. However, the larger takeaway from the CAR's announcement is that it marks the end of the original California dream.
California home prices have reached stratospheric highs for decades, but the current price is breathtaking even by those standards. The median home price of $904,000 in California is up 5% from just a month ago and 11% from April 2023. That is a substantial increase by any measure and it's certainly a contributing factor to the state's homeless crisis.
However, low interest rates allowed very well-qualified borrowers to the point where they could still get deals done in California for much of the last 15 years. It's sad to say that at this point, no one under 40 can recall California's original promise. Baby boomers and a fair share of Generation Xers from all over the country could go to the Golden State and live idyllic lives.
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For some people, that dream was Hollywood, but for many more, it was good schools and affordable housing in metropolitan areas of great cities like San Francisco and Los Angeles. It used to be that simple. To be certain, California has always had its share of wildly expensive enclaves like Beverly Hills, Malibu, Pacific Heights, and LaJolla. However, that's where the million-dollar homes used to be, and living there was something people aspired to.
However, California's pledge was that even individuals unable to afford $900,000 for a house could still purchase homes in the San Fernando Valley or the East Bay. Schoolteachers, firemen, police officers, and working people could buy a $200,000 house with FHA financing and only put $6,000 down. Nowadays, the notion of a $200,000 house anywhere in California seems like something out of a fairy tale.
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$200,000 is more like a down payment on the average house in California. According to an analysis from GoBanking Rates, California is the second most expensive state in the country to live the "American dream." The average couple in California would need to earn $245,000/year to afford a home and raise two children comfortably. Only Hawaii, where almost every consumer product is brought in from off the island, costs more.
According to the September 2023 report by the United States Census, America's median income was $74,580, covering only about one-third of the cost of a house in California. Bear in mind that $245,000 is what it takes to live a normal life and buy a normal house in California, not a mansion in Pacific Palisades or a 100-acre ranch in Ojai with a main house surrounded by orange groves.
By all indications, California's median home price is only expected to increase. Even if the market suffered a 30% correction, most buyers would be priced out by today's interest rates. California remains a paradise, though it appears to have become inaccessible to all but the wealthiest Americans. That is a stark contrast to the Golden State's past, and it seems that the bygone era is lost forever.
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