Mortgage payments eat up 79% of California’s median wage – with rates at 0%

It’s hard to fathom just how unaffordable the homeownership dream has become.

Industry buzz suggesting that a subtle dip in mortgage rates could make a noteworthy difference for homebuyers is somewhat misleading. Let me offer what I’ll admit is an absurd example.

Think of 30-year mortgages with no interest. Yes, 0%.

My trusty spreadsheet found that under this homebuyer’s ultimate dream scenario, the median wage requirement met rough qualification standards in just 12 states: West Virginia, Iowa, Ohio, Oklahoma, Michigan, Louisiana, Kansas, Kentucky, Illinois, Indiana, Mississippi and North Dakota.

That’s how crazy high home prices have become.

Consider my house-financing assumptions for buyers: The median-priced home (using average values from Zillow and Redfin) and the median statewide income, according to federal pay data.

Remember, the median is the midpoint of a data set where half is higher and half is lower. It’s a statistical tool to measure what’s typical.

This hypothetical buyer is financing 80% of the purchase price. And to be somewhat realistic, this homebuying calculation includes annual payments of property taxes and insurance – estimated at 1.6% of the home’s value.

Those monthly costs could be no more than 30% of income for a “qualified” buyer.

Not so Golden State

California’s $821,000 median-priced home gets a typical buyer a $2,919 monthly payment with a 0% mortgage. Don’t forget the $164,000 down payment.

Yes, payments are that high, even with a zero-percent loan! Remember, you still need to repay the loan’s principal. California’s payment is the second-highest among the states.

Worse, 12 months of those payments equal 79% of the $44,600-a-year median wage – nowhere near the 30% threshold.

California isn’t alone. Median wages in 37 other states also won’t qualify under this 30% standard.

Bigger paychecks

Now, let’s step up the pay ladder to the 75th percentile.

That’s the mid-point of the upper half of wages. That’s usually workers in high-skill, good-paying industries or top performers in lower-wage sectors.

That kind of pay should get you a home, no? Those wages meet the 30% standard in 34 states, and California is not among them.

California’s projected house payments for the median-priced home still eat up 46% of the $76,800 income at the 75th percentile.

So, who’d qualify in California at 0% rates?

Jump up the wage scale to the 90th percentile and California’s $123,500 wage at these top-shelf positions translates to 28% of pay going toward the state’s median house payment.

Note that these 90th percentile paychecks are often tied to superstar workers or top executives, with compensation that is exceeded by only 10% of all paychecks. Only Hawaii’s wages don’t qualify at this pay grade.

Two incomes?

Contemplate this dreamy affordability yardstick through the lens of a common house-hunting characteristic: a two-income household.

If those two paychecks are at the median wage, with 0% mortgages, this combination fails to meet the 30% maximum in just three places. Yup, including California.

Yes, two median-wage earners in the Golden State – that’s pay totaling $89,200 – would see house payments eat up 39% of their income at 0%. Ouch!

Another dream

Imagine a slightly more reasonable dreamy scenario: Mortgage rates returning to their historic low of 2.65% set on the week ending Jan. 7, 2021, according to Freddie Mac.

Of course, to achieve a 2.65% rate again, we must recall that the period included massive economic upheaval tied to pandemic lockdowns. So, be careful what you wish for.

Even 2.65% mortgages couldn’t get the median wage under the qualifying 30% payment-to-income threshold at current prices. California payments would be 99% of the median wage.

Wages at the middle-of-the-top-half – the 75th percentile – are less than 30% of 2025’s house payments in only 21 states – and not California,

It requires superstar pay – the 90th percentile – to have wages below 30% of payments in 44 states.

Of course, not in California. To qualify at 2.65%, Golden State house hunters need a pair of jobs paying wages at the 75th percentile.

Reality checks

Forget these financing fantasies. The harsh reality is that mortgage rates in September 2025 are roughly 6.25%.

Lofty pricing and rates mean California house hunters, by my math, need a pair of 90th percentile superstar wages so that house-payment checks don’t gobble up more than 30% of income. That’s $247,000 a year.

It’s not just the Golden State. At 6.25% rates, no state’s median wage is under 30% of house payments. Just two states qualify at the 75th percentile.

Go to the 90th percentile wage, and paychecks in just 28 states are under the 30% maximum.

And two house hunters, each earning a 75th percentile wage, qualify today in only 41 states.

The price is wrong

If it’s not cheap money improving affordability, what size price cuts would work magic in today’s 6.25% mortgage world?

Imagine a California house hunter earning the median wage trying to buy the median-priced home. I know, an unrealistic goal – but let’s follow the math.

To have payments at just 30% of this income level, California home prices would have to fall 78%.

For the house shopper earning California’s 75th percentile wage, a price fall of 63% is required. And the superstar worker at the 90th percentile wage still needs a 40% drop.

Now ponder house-hunting duos.

A pair of median-wage paychecks only works if California prices dip 57%. What about two 75th percentile wages? A 26% price cut makes for qualification.

Price declines must be part of any substantial affordability cure.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com