Yet they also benefited from opportunities like remote work flexibility and historically low mortgage rates in 20202021.
Statewide Overview of Moderate-Income Homebuying
Californias housing affordability for middle-income families hit record lows by 20222023.
By early 2024, the situation had barely improved with 17% affordability.
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Home prices soared from 2018 to 2023, far outpacing income growth.
Californias median home value rose roughly 37% just between 2018 and 2023.
By mid-2022, the states median exceeded $900,000.
When ultra-low interest rates arrived in 20202021, many moderate-income buyers seized the moment despite high prices.
Rock-bottom mortgage rates (under 3%) in 202021 helped offset high prices, temporarily boosting buying power.
Households under $250K encompass a wide range from lower-income families up to upper-middle earners.
First-time buyers dropped to only 24% of sales in 202223, an all-time low share.
What Properties Are Budget-Conscious Californians Buying?
For buyers on a budget in California, the jot down of home matters immensely.
Buyers often had to compromise on location or size to afford a house.
During 20202021s frenzy, even modest single-family homes received dozens of offers and sold well over asking.
This competition priced out many middle-income shoppers, pushing them either to cheaper regions or into other property types.
By 20222023, rising interest rates cooled the bidding wars somewhat, but single-family prices remained elevated.
Statewide, the median detached home price stayed above $800K in 2023.
These attached homes are generally less expensive than detached houses in the same area.
Newer townhome developments in suburbs also attracted families looking for a bit more space on a budget.
Manufactured Homes
Some Californians expanded their search to mobile or manufactured homes as an affordability lifeline.
These factory-built homes (in mobile home parks or on leased land) cost significantly less than site-built houses.
Demand for manufactured homes grew during 20182023, evidenced by rising prices.
In California, the average new mobile home price rose about 37% in that period.
This appreciation suggests more buyers including retirees on fixed incomes and lower-income families turned to manufactured housing.
Others bought homes with ADUs (accessory dwelling units) or with space to add a rental unit.
A few younger buyers even pooled resources with friends or family to buy multi-family buildings as co-investors.
By 2022, investor purchases slowed sharply as higher rates made leveraging debt for rentals less attractive.
Upsizing to More Space
Paradoxically, a significant number of moderate-income buyers upsized during this time.
Many took advantage of record-low interest rates in 20202021 to afford larger homes than they could previously.
Many Bay Area families relocated to Sacramento seeking a bigger home and better quality of life for their money.
Downsizing or Buying Smaller Homes
Some moderate-income Californians downsized by necessity or choice.
Many moderate-income households left high-cost coastal cities for lower-cost inland markets.
This internal migration was accelerated by remote work.
in search of affordable larger homes.
Second Homes and Vacation Properties
Some moderate-to-upper-middle income households joined the pandemic-era vacation home boom.
Many of these buyers were relatively affluent, but not all were super-rich.
By 20222023, the second-home craze cooled significantly as loan fees increased and rates rose.
The COVID-19 pandemic in 2020 suddenly allowed millions to work from home, untethering them from office locations.
Migration patterns from 2020 to 2023 reflected a remote work reshuffle.
Los Angeles and San Francisco consistently ranked at the top of metros homebuyers were leaving during this period.
Remote workers essentially arbitraged housing costs: keeping their California-level salaries but buying in a cheaper market.
Within California, inter-regional moves were significant.
Remote work also led to an acceleration of the California Exodus of residents to other states.
Top out-of-state destinations for Californians included Nevada, Arizona, Texas, Washington, and Oregon.
Remote work trends started to plateau by 20222023 as some employers began calling workers back to offices part-time.
Bay Area remote rates dropped from 33% in 2021 to 25% in 2022.
This slowing of the remote work revolution tempered migration a bit.
In California, a 10% down payment on a $800K home is $80,000 a daunting sum.
Nationwide, about 29% of first-time buyers used FHA loans in recent years.
In California, FHA is especially common in entry-level price points and inland areas.
Throughout 20182023, VA loans typically made up about 710% of home purchase loans nationally.
State and local down payment assistance programs also expanded.
Many buyers also relied on personal resources.
The prevalence of gift funds and multi-generational support grew.
By 2023, 25% of U.S. first-time buyers used gifts or loans from family/friends for their down payment.
Many moderate-income buyers got locked out as their pre-approval amounts shrank.
The age of the average homebuyer climbed significantly.
Nationally, the median age of all homebuyers hit 56 in 2023 (the highest on record).
California, with its extreme costs, likely sees even older median ages in some areas.
Young adults in their 20s and early 30s faced immense difficulties saving down payments and qualifying in this market.
The composition of buying households also shifted.
In California, an even higher reliance on dual incomes is expected.
Single buyers, especially single parents, struggled to compete.
The Bay Area remained the least affordable region.
Only around 12-15% of Bay Area households could afford a median home.
Budget-conscious buyers in the Bay Area mostly targeted condos or far-out suburbs.
For example, eastern Contra Costa or Solano County (e.g.
Los Angeles and Orange County were also very expensive, though slightly more attainable than SF.
Affordability indices in these counties hovered in the teens.
The Inland Empire became a refuge for those priced out by the coast.
The Central Valley and greater Sacramento region were considerably more affordable and thus magnets for budget-conscious buyers.
Sacramentos metro median price in 2023 was in the high $400Ks to low $500Ks.
This meant roughly 4050% of local households could afford the median a much healthier situation than the coast.
Comparing 20182023 to 20082017: Whats Changed?
By 2012, Californias median home price was so low that 5060% of households could afford it.
But they were still near or below the 2006 bubble peak for much of the state by 2017.
In 20182023, prices shot far above any prior peak.
In 20082017, interest rates were historically low but not as low as the pandemic.
FHA loans were extremely popular right after the crash in 2009, over half of first-time buyers used FHA.
Over the 2010s, FHA usage declined as credit eased and home prices rose.
Then in 20202023, with competitive markets, many FHA buyers struggled to get offers accepted.
The earlier period (20082017) saw younger buyers on average.
Overall, the 20182023 period was far less friendly to moderate-income homebuyers than 20082017.
They chased the dream of homeownership amid headwinds of soaring prices and shrinking affordability.
Younger and less affluent Californians face longer odds and longer waits to get a foot in the door.
The trends of 20182023 highlight both the resilience of determined homebuyers and the urgency of the states affordability crisis.
