6 California Cities Make the Least Affordable List for Home Buyers

Only four states have median-priced homes considered affordable – and California is not one of them.

Of 48 states with available data, a median-priced home is not affordable for the typical household in 44 of them, a fascinating new report from Clever, a real estate data company, reports.

The only four states where the typical home is financially attainable for the median household are West Virginia, Ohio, Iowa, and Indiana.

Where does California land? Least affordable – at the bottom – of course.

In the State Capitol of Sacramento, residents need an annual income of $152,749 to afford the median home priced at $549,332. But Sacramento residents only make $89,237 – $63,512 less than needed, Clever reports.

With the median home sale price in Sacramento at $549,332, the annual mortgage payment is $42,770.

Compare that to Pittsburgh, PA, where the median home sells for $199,573, and the median household income is $70,607.

Six California cities landed in the least affordable metros list:

1. Los Angeles

2. San Jose

3. San Diego

4. San Francisco

5. New York City

6. Miami

7. Riverside
8. Boston
9. Seattle
10. Sacramento

Nationally, first-time buyers must earn $119,769 to comfortably afford the median-priced home in the U.S ($332,494) with 10% down. That’s about $45,000 more than the typical household earns each year ($74,755).

The six cities where the median-priced home is affordable for median earners are:

1. Pittsburgh, Pennsylvania
2. Cleveland, Ohio
3. St. Louis, Missouri
4. Memphis, Tennessee
5. Indianapolis, Indiana
6. Birmingham, Alabama

In Pittsburgh, the median home sells for $199,573. After a 20% down payment, the mortgage payment, including taxes and insurance, costs $1,398 per month, or $16,777 per year, based on a 30-year mortgage.

To afford that mortgage without exceeding 28% of one’s income, a household would need to earn about $59,919 per year. The median household income in Pittsburgh is $70,607, meaning it’s possible to comfortably afford a median-priced home.

Here are the top 5 most affordable cities in the country where median-priced homes are considered affordable:

Here are California’s 6 cities stats:

And here are California’s bottom 4 – the least affordable metro areas in the US for home buyers:

Along with these screamingly high home prices in California, capital gains taxes need to be considered. Capital gains tax is imposed on the profit from the sale of assets – your home, stocks, or business. California’s capital gains tax rates align with the progressive income tax system, ranging from 1% to 13.3%, based on income.

With President Joe Biden’s budget proposal eliminating the preferential long-term capital gains rate when income exceeds $1 million, that would mean capital gains would be taxed at ordinary income tax rates instead of at more favorable lower capital gains tax rates, Forbes reported. “President Biden wants the tax rate to increase on top earners from 37% to 39.6%. That is almost double the 20% capital gains rate. Therefore, this change would have harsh tax consequences on some taxpayers.”

Ouch.

The table below compares home prices and incomes for 48 states, based on the latest interest rates(7.22%) and a 20% down payment. (Data for Alaska and Vermont is not available)

Here is California:

Here is the middle of the pack:

Notably, Clever reports affording the US median priced home on the median income of $74,755 takes a 45% down payment.

Ouch.