Dramatic change would be required to fix California’s homebuying affordability mess. My trusty spreadsheet compared home-price increases with income growth for 10 large California metropolitan areas using housing indexes by ICE, a mortgage-tech firm, and pay stats from the US Bureau of Economic Analysis. First, consider the estimated median house payment for these California metros. In 2018, payments on the typical $509,400 home purchase ran $2,020 monthly with an average 4.3% mortgage rate, assuming a 20% downpayment. That was 22% of a typical house hunter’s $109,100 income, including two earners. Then, contemplate the payment on today’s $759,500 median-priced home. The payment doubled to $4,000 monthly with 6.9% rates. The mortgage now gobbles up 32% of the $148,500 income that risen 36% in six years. So, what would it take to return this payment burden to pre-coronavirus levels? Rates would have to fall to 3.5%. Incomes would need to surge 50%.Or prices would need to drop 33%. Or some combination of the three. This lack of affordability is why one-third fewer California homes will be sold this year than in 2018. How did we get here? Remember that the housing market was upended by several things during the pandemic: a demand for more living space, mortgage rates under 3% and stimulus checks boosting incomes. Now let’s look at how six years of home appreciation through October contrasts with rising per-capita incomes during the six years ending in 2023. In eight of these 10 California metros, home-price gains outpaced incomes. Here’s how they ranked by the gap … Bakersfield: 63% gains in home values compared with 29% income growth. Inland Empire: 65% home gain vs. 37% income growth. San Diego: 66% home gain vs. 39% income growth. Fresno: 60% home gain vs. 33% income growth. Ventura County: 51% home gain vs. 36% income growth. LA-OC: 50% home gain vs. 39% income growth. Sacramento: 46% home gain vs. 35% income growth. Stockton: 50% home gain vs. 45% income growth. And in two California metros, incomes beat home prices … San Jose: 34% home gains topped by 54% income growth. San Francisco: 26% home gains topped by 46% income growth. Sliver of hope For homebuyers, a little bit of good news: appreciation is cooling. Price gains in the 12 months ending in October were significantly smaller than the previous five-year appreciation pace in all but one of the 10 metros. San Diego saw the biggest chill, with prices rising 3.2% in the past year – down from annual average gains of 9.9% between 2018 and 2023. That is a 6.7-percentage-point cooldown. San Jose was the lone spot without a dip in appreciation. Its 5.1% year’s gain was a smidgen above the 5% yearly increases of 2018-23. Here’s how the nine other metros fared by ICE math, ranked by appreciation chill … Inland Empire: 3.5% year’s gain vs. averaging 9.8% annual increases in 2018-23 – 6.3 points cooler. Sacramento: 1.7% year’s gain vs. 7.5% annually in 2018-23 – 5.8 points cooler. Bakersfield: 4.1% year’s gain vs. up 9.4% annually in 2018-23 – 5.3 points cooler. Stockton: 2.9% year’s gain vs. up 7.9% annually in 2018-23 – 5 points cooler. Ventura County: 3.3% year’s gain vs. up 7.9% yearly in 2018-23 – 4.7 points cooler. Fresno: 4.2% year’s gain vs. up 8.9% annually in 2018-23 – 4.7 points cooler. Los Angeles-Orange County: 3.9% year’s gain vs. up 7.7% annually in 2018-23 – 3.7 points cooler. San Francisco: 1.3% year’s gain vs. up 4.4% annually in 2018-23 – 3.1 points cooler. But smaller home price gains are by no means a cure, because “affordability” really means lowering prices. Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]