Between 2018 and 2023, California’s housing market saw dramatic shifts that especially impacted households earning under $250,000 annually. These moderate-income, budget-conscious buyers faced surging home prices, a pandemic housing frenzy, and a sharp rise in interest rates. Yet they also benefited from opportunities like remote work flexibility and historically low mortgage rates in 2020–2021. This analysis examines how Californians with sub-$250K incomes navigated the market for primary residences – and occasionally second homes or investments.
Statewide Overview of Moderate-Income Homebuying
California’s housing affordability for middle-income families hit record lows by 2022–2023. The statewide median home price neared $830,000 in mid-2023, requiring an income around $208,000 to afford with 20% down. Fewer than 1 in 5 households (16%) could afford that median-priced single-family home – down from 51% in 2012 when prices were much lower. By early 2024, the situation had barely improved with 17% affordability.
Home prices soared from 2018 to 2023, far outpacing income growth. California’s median home value rose roughly 37% just between 2018 and 2023. By mid-2022, the state’s median exceeded $900,000. This price inflation eroded affordability for middle-class buyers and pushed many to consider alternatives: smaller homes, different regions, or creative financing.
When ultra-low interest rates arrived in 2020–2021, many moderate-income buyers seized the moment despite high prices. According to a Federal Reserve analysis, the pandemic period saw “peak homebuying” participation from low- and moderate-income buyers, as well as younger buyers and buyers of color. Rock-bottom mortgage rates (under 3%) in 2020–21 helped offset high prices, temporarily boosting buying power. However, by 2022 the surge in prices and the spike in interest rates (approaching 7%) caused a pullback…