Buying a house in four major California cities – San Jose, Los Angeles, San Francisco and San Diego has become nearly impossible for most people, says a study by Chapman University’s Center for Demographics and Policy.
The study looked at how home prices compare to people’s incomes across 95 housing markets in late 2024.
Honolulu and other cities also among the worst
Honolulu also made the top 10 list of hardest places to afford a home. There, a typical home costs 10 times more than the average annual income.
Out of all the areas in the study, 12 were called “impossibly unaffordable.” None of the 95 markets were considered “affordable.”
In the study, any place where home prices were at least 9 times higher than yearly income was labeled “impossibly unaffordable.” A truly “affordable” place is one where a home costs no more than three times the annual income.
Hong Kong and Australia among the most expensive
Hong Kong had the worst affordability problem, with home prices more than 14 times the average income. Several Australian cities – Sydney, Adelaide and Melbourne were also in the top 10.
Top 10 least affordable housing markets
(House price-to-income ratio):
- Hong Kong – 14.4
- Sydney – 13.8
- San Jose, California – 12.1
- Vancouver, Canada – 11.8
- Los Angeles – 11.2
- Adelaide, Australia – 10.9
- Honolulu – 10.8
- San Francisco – 10
- Melbourne, Australia – 9.7
- San Diego, California – 9.5
Growth restrictions add to high prices
“These high prices are largely the product of policies that seek to limit growth on the periphery, which has been the usual way that cities have grown,” Joel Kotkin, director of the Center for Demographics and Policy at Chapman University, was quoted by CNBC Make It as saying.
In California, the government is trying to protect more natural land and instead support building more dense housing, like apartments or tiny homes.
But Wendell Cox, the study’s author, said that just building more high-density housing might not fix the problem. These new homes are often small and expensive, and don’t meet the needs of most middle-class families.
People are buying less and searching longer
David Leis, president of the Frontier Centre for Public Policy, said in the report that the loss of affordable housing “has been the principal driver of the present cost of living crisis affecting the middle and working classes.”
In the US, many people just can’t afford today’s home prices, so they end up renting for longer. This makes it harder to save money for a down payment, said MaryAnne Gucciardi, a financial planner in Massachusetts, in a January interview with CNBC Make It.
In the same article, Texas-based financial planner Andrew Herzog said, “more often than not, I’ve simply advised people to prolong their search, while still saving for an emergency fund and retirement.”