Mortgages Rates in Southern California Still Aren't Where They Need to Be

Today’s Home Payment, on average, is almost 16% More Affordable Than the 55-Year Average — But Why Doesn’t It Feel That Way to Homebuyers across Southern California?

Living in Long Beach, I talk to homebuyers and sellers daily that are keenly aware of housing affordability – especially those looking to get into their first home after paying higher rents these past few years. If you’ve been keeping an eye on mortgage rates lately, you might be wondering why friendlier interest ratee haven’t translated into a more active buyers searching for their first or next home. After all, with rates trending down, shouldn’t buyers be flooding back in? The reality is a bit more nuanced — and understanding it requires looking beyond the headline rate to the true cost of homeownership: the monthly payment.

A Historical Perspective on Affordability

As of November 4th, the average 30-year fixed mortgage rate sits around 6.34% (fluctuating between 6.13% and 6.34% over the past few days), according to Freddie Mac. On paper, that sounds encouraging. But let’s break it down in real terms.

At 6.34%, each $1,000 borrowed costs about $6.11 per month. That means:

• A $500,000 mortgage translates to roughly $3,095 per month,
• And a $1 million loan runs about $6,140 — and that’s before factoring in property taxes, insurance, and HOA fees.

Now, let’s put that in perspective. In October 1981, rates hit a jaw-dropping 18.63%, meaning buyers paid about $15.59 per $1,000 borrowed — a staggering 154% higher than today’s cost. So yes, things could be much worse.

Even compared to just a year ago, there’s been a bit of relief. Rates have fallen from 6.72% to 6.34%, lowering the basic cost of borrowing by about 6%. And if you go back two years, when rates were hovering near 7.76%, today’s financing is roughly 15% cheaper.

Looking at the long view, payments today are 16% more affordable than they’d be using the 55-year average mortgage rate of 7.25%. That’s meaningful progress — just not enough to reignite a full-scale buying boom.

Why the Slump Persists

So, if payments are more affordable by historical standards, why does the market still feel sluggish?

The short answer: Income just hasn’t kept up with the rise of home prices
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Even with better rates, home prices across Long Beach, Orange County, and much of California remain high. According to the California Association of Realtors, only about 15% of California households can afford a median-priced home as of mid-2025. That’s the real choke point.

And while today’s rates are a far cry from 1980s levels, they’re still dramatically higher than the record lows of early 2021, when some buyers locked in loans near 2.7%. Back then, the Federal Reserve was keeping money cheap to stabilize the economy after COVID-19’s disruption. At that point, the cost of borrowing dropped to just $4.03 per $1,000 borrowed — making today’s costs about 52% higher.

A Market Searching for Balance

The Federal Reserve’s stance has shifted again. After several years of tightening to curb inflation, the Fed has now cut its benchmark rate twice in recent months — signaling renewed concern about the job market and overall economic growth. These moves don’t instantly drop mortgage rates, but they do open the door for continued softening, which could offer modest hope to homebuyers sitting on the fence.

The Bottom Line?

While we’re not in a “cheap money” era anymore, the current rate environment is far from dire. In fact, compared to much of U.S. history, financing a home today is still relatively favorable.

For buyers who have been waiting for the “perfect” rate, it may be time to look instead at what’s sustainable and what fits your long-term financial picture.
And for sellers, understanding how today’s buyers view affordability can help you price strategically and attract the right offers — especially in competitive coastal markets like Long Beach, Seal Beach, and North Orange County.