Source: Cal Matters —
Back in 2021, when mortgage interest rates were plumbing all time-lows, Caitlyn O’Connell and her fiance nearly closed on a home in San Luis Obispo.
They backed out of the deal after discovering major issues with mold, she said. Over the course of the next year, the cost of a typical mortgage payment in California increased by as much as 56% in some markets, according to housing data firm Zillow.
O’Connell feared she and her now-husband were locked out of homeownership forever. This year they abandoned their search.
“If we stay in California, we will have to be renters,” said O’Connell, who lives in Los Angeles’ Venice Beach neighborhood. “I don’t know, it really just feels like we’re stuck.”
Tens of thousands of California first-time home buyers saw their homeownership ambitions fail last year as mortgage interest rates doubled after the Federal Reserve began its inflation-fighting campaign last summer.
While the frenzied bidding wars that have defined parts of the state’s housing markets for more than a decade may have subsided, the monthly costs of a mortgage have left the state’s market more unaffordable than at any point in the last decade, particularly for lower- and middle-class families.
In December, the state’s median home price dropped to $774,580, according to the California Association of Realtors, a 2.8% annual decline likely not significant enough to make a meaningful contribution to housing affordability.
The prospect of higher monthly mortgage payments means many sellers can’t afford to trade-up, agents and economists said, resulting in too few economically priced homes. The situation is a considerable change from the last housing downturn, which began in 2007, when home foreclosures and other distressed sellers triggered big price declines and opened a rare affordability window that has long since slammed shut.
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