California Housing Crisis: Starter Homes Hit $1M+

Published May 6, 2025 by Alfie
Home Owner
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A major housing affordability crisis in California is occurring. According to a recent Zillow report, 113 cities’ starter home prices are above $1 million. That’s over half of all U.S. cities where starter homes cost this much. What was once considered the first step to homeownership is now unattainable for many Californians.

The luxury is being able to purchase even a most basic home. Especially challenging for first time buyers, this steep cost. Now a lot of people are renting or even leaving the state.

Skyrocketing Mortgage Payments

According to the Legislative Analyst’s Office, monthly mortgage payments for lower priced homes now average $3,556 per month. Nearly 80% more than the typical rent of about $1,992 per month. Owning a home in California is out of reach for many.

Because the rent is so much higher than ownership, people either stay renting or have to leave to buy somewhere else. Because it’s such a huge reason people are moving out of state.

The Outmigration Wave

For years outmigration from California has been climbing. As such, the historic high was reached in 2021 when 373,083 more people left the state than moved in. And that number speaks to a level of change in population and priorities. Those leaving include middle income earners, families, and retirees.

Residents are moving to other states where housing is less expensive, citing the rising cost of living. There are top destinations like Texas, Arizona and Nevada.

Impact on the Economy and Workforce

It’s not just about real estate. Fewer residents mean local economies blister. Businesses lose workers. Schools have fewer students. Property and sales taxes collected by cities are lower. Teachers, nurses, and police officers, among such essential workers, are priced out of their own communities.

The more people leave, the more unstable the housing market. A city does not grow with empty homes. They are symbols of a system that’s broken for average families.

Also read: Cost of living in New York for International Students: Budget Guide

Generational Frustration

The hardest hit are the younger generations. Millennials and Gen Z adults may feel they’ll never own a home. And wages have not kept up with rising costs. For many Californians under 40, being able to own a home, a dream that was once a key part of the American Dream, feels out of reach or a distant fantasy.

This has brought a social shift. Housing costs are pushing more people to delay marriage, family, and big life decisions.

Political and Policy Challenges

It is a political issue. California lawmakers are under pressure to act. However, some cities are attempting to build affordable housing. Some are changing zoning laws to allow for more apartments and duplexes. These changes do not happen overnight and are frequently met with local opposition.

The state’s regulations and slow building processes make it harder to add new homes, critics say. Cutting red tape might help ease the crisis and lower prices, they believe.

What the Future Holds

Unless there are serious changes, the crisis is likely to keep growing. The housing shortage could get worse, and outmigration may again rise. The resources and talent exist in California to solve the problem, but the time is fast approaching for action.

It’s not just about prices. This is about keeping families together and supporting local economies so we can make sure the next generation has a better future.

California has beautiful weather, great employment opportunities, and a lot of natural beauty. If they can’t pay to stay, all of that won’t matter. There has to be a balance between growth, affordability, and accessibility, a balance that the state has to pay attention to. The future depends on it.

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Alfie