New study shows that residents need to make $221,000 per year to own a home in LA
A new study by real estate brokerage Redfin revealed that the American dream of owning a home is now further out of reach for many people trying to live in Los Angeles.
"Real estate in Los Angeles has just gotten so expensive, it's out of reach for people who are upper middle class — let alone middle class," said Redfin Chief Economist Daryl Fairweather.
According to the Redfin study, the income needed to buy a median-priced home in L.A. has soared by 40.7% in one year. In 2021, anyone looking to buy a home in the city of Angels needed to make $157,000 a year. However, now, that same person would need to make $64,000 more, or $221,000, to buy a median-priced home.
"There are basically no affordable neighborhoods in Los Angeles anymore — there used to be," said Fairweather. "If you went to certain neighborhoods you could find a deal or went with a condo you could find a deal. But, there are so few homes affordable to somebody who's trying to buy their first."
However, L.A. isn't even the highest in Southern California. In Anaheim, a potential homeowner needs to make $254,000 to buy a median-priced house.
In Northern California, it's even more. People searching for homes in San Jose must make $363,000; in San Francisco, $402,000.
Many of these stats are driven up because of climbing mortgage rates. Despite these prices, realtors said there is still hope at the American dream.
"There are some really creative programs out there to get buyers into homes," said realtor Suzanne Seini. "You're marrying the home, not the interest rates."
Seini recommended potential homeowners should find a lender before looking for down payment programs. She recommended residents ask about 3-2-1 mortgage, which allows people to pay less now, in hopes of refinancing later.
"If interest rates today are 6.99%, your first year, the interest rate is at 3.99%," said Seini. "So, there are a lot of ways to make this more affordable to people."
Fairweather agreed with Seini and recommended prospective buyers act now despite the high interest rates.
"If there's a home on the market right now, that you can afford a mortgage on, and you really like it — then I don't think you should wait," said Fairweather. "Because finding that dream home may be more difficult than getting the timing right."
However, simply affording the mortgage has many prospective buyers like Alex Isso renting.
"It seems so impossible and so out of reach," she said. "When you think of our parents buying houses when they were young it was always so much sooner. Now, I'm in my 30s and I'm still living in an apartment and we don't have the means to afford a house."
Fortunately, home prices are slightly declining as well as interest rates. However, the United States Census Bureau estimated that only 55% of Californians own their home, one of the lowest rates in the nation.