Buying a house in California has always been the dream of many people, but it is one of the most difficult housing markets in the country. With prices starting to cool down in some areas, buyers are asking very direct questions:
- Are California home prices dropping?
- How much do I have to earn to buy a house of $ 400,000 or $ 500,000?
- Should I just buy a house or wait till 2026?
- Where can I still find cheap houses for sale in California?
Let us answer all these questions in a simple way, so that you can know where you are standing as a future homeowner.
Are California Home Prices Dropping?
Yes, California home prices are starting to cool off in 2025. According to Redfin, the statewide median home price in July 2025 was around $831,000, which is about 0.7% lower than last year. This does not seem to have a major decline, but after continuous price increase over the years, a small decline is also a major change.
Homes are also sitting longer on the market, with an average of 44 days before selling. This is giving buyers a little more time and bargaining power.
Some cities are feeling the price dip more than others:
- San Francisco: Down around 2.5% (as reported by the San Francisco Chronicle)
- Oakland: Prices dropped nearly 7% compared to last year
- San Diego: More listings are available, and houses are selling slower
This doesn’t mean California is headed for a housing crash. Experts say it’s more of a market reset. The sellers are adjusting with reality, while buyers eventually have scope of interaction.
How Much Do You Need to Make to Afford a $400,000 House in California?
It is not easy to find a house of $ 400,000 in California, especially in big cities, but you can still find them in inland areas, small cities or repaired places.
Then how much do you have to earn to buy it?
- With 20% advance payment, the general buyer will require about 100,000 to 135,000 dollars per year.
- If you use "30% rule" (not spending more than 30% of income at housing), a person earning $106,000 per year can comfortably buy a house of $ 400k.
Of course, things like property tax, insurance and your debt-to-income ratio can increase or reduce that requirement.
Should You Buy a House Now or Wait Until 2026?
This is the question on almost every Californian’s mind. Let’s look at both sides.
Reasons to Buy Now:
- More inventory: Listings are rising across the state, giving you more choices.
- Power of conversation: Buyers can now demand a slight cut in repair, credit or even price.
- Negotiation power: Buyers can now ask for repairs, credits, or even small price cuts.
Reasons to Wait Until 2026:
- High mortgage rates: Rates are still in the 6.5%–6.8% range, which makes payments heavy (see Forbes Housing Predictions).
- Possible price dips: Analysts believe prices may continue to ease slightly in 2025 and 2026.
Bottom line? If you find a house friendly for your budget and lifestyle, then buying now can make stability and equity safe in future. But if you are flexible and want less payment, then waiting can be beneficial.
How Much Money Do You Need To Buy A House Of $500,000 In California?
The house of $ 500,000 in California is more realistic than $ 400,000, especially in inland areas and small cities.
Here’s the breakdown:
- With 20% down and standard lending rules, you’d need an annual income between $125,000 and $150,000.
- That keeps your monthly mortgage, taxes, and insurance within the safe 28–30% of income range.
If you earn less, you can still be eligible for this scheme by depositing more funds or reducing the loan. But $125K a year is the comfort zone.
Cheap Houses for Sale in California - Where to Look
While California’s coastal cities remain sky-high, there are areas where you can still find affordable homes.
More Affordable Regions:
- Central Valley (Fresno, Stockton, Bakersfield) – Homes between $350K and $500K are common.
- Inland Empire (Riverside, San Bernardino) – Cheaper than Los Angeles, with larger lots.
- Northern California towns outside of the Bay Area – More space, lower prices.
- High Desert areas (Victorville, Barstow, Lancaster) – Growing communities with entry-level homes.
If you are serious about finding a "cheap" house in California, look away from the beach and close to the inland region.
Final View - Should you buy or wait in 2025?
California's housing market is no longer as disturbed as it was a few years ago. Prices are flattening, listings are rising, and buyers finally have some power. Still, affordability remains tough—most households need six-figure incomes to comfortably buy even a “cheap” home.
If you want stability and find something within your budget, buying now makes sense. If you want the best opportunity at low rates and soft prices, it would be appropriate to wait by 2026.
At the end of the day, the best time to buy a home isn’t just about the market—it’s about your life, your budget, and your long-term goals.
