1.27% Mortgage Rates Needed If Housing Prices Don't Drop In Riverside County: Report

RIVERSIDE COUNTY, CA — Home prices are so high in some California coastal areas that not even an interest-free loan would make the typical house in those posh neighborhoods affordable for people earning the state's median income, according to a recent research article from Zillow.

Sure, expensive coastal communities in San Diego and San Francisco are out of reach for most, but according to Zillow, even the Riverside metro area is too pricey for so many.

Mortgage rates would need to drop to 1.27% for a typical Riverside home to be affordable to a family earning the median income, assuming they put a 20% down payment on the purchase, according to the July 29, 2025, Zillow article "Rate, Price Drops Won't Substantially Improve Affordability."

Such a decline in interest rates is currently unrealistic. On Tuesday, the average 30-year fixed mortgage rate was about 6.38% to 6.40%, although rates vary by lender.

California's 2024 median household income was $100,600, according to the Federal Reserve Bank of St. Louis. Riverside County comes in below that median at $90,251, according to the data.

The math presents a challenge for potential first-time homebuyers. The median sales price of a Riverside County home was $656,333 as of July, according to Zillow. Add taxes, insurance, and possible HOA fees to the mortgage payment, and the monthly nut — about $4,220 — is more than most families can afford when financing at current interest rates.

In fact, Fannie Mae offers a free online Mortgage Affordability Calculator. Assuming a family has zero debt and a gross monthly income of $7,500 (gross annual income of $90,000), their maximum home purchase price is $489,723, assuming they put 20% down and obtain a 6.3% interest rate, according to Fannie Mae.

Yes, affordability for homebuyers has improved slightly over the last year, according to Zillow.

"Price growth has flattened out, mortgage rates have been marginally lower and income growth has forged ahead," research from the online real-estate marketplace reports. "But affordability challenges are still holding back buyers, especially those without equity from a previous home to fund their next purchase."

Zillow expects home values to tick down nationwide, ending the year about 2% below where they started. That small decline won’t be much of a setback to most homeowners’ equity following the 49% increase since 2019. However, it won’t move the needle very far for first-time buyers priced out of the market.

"Home prices and/or mortgage rates would need to drop by massive amounts to make a typical home affordable for a median-income family," according to Zillow.

It's a glum picture.

"If buyers are waiting for big drops in mortgage rates or prices to help affordability, they're in for a rude awakening," the Zillow research finds. "Just like falling rates, that kind of correction in house prices won't happen without a serious slowdown in economic growth and income growth, and a rise in the unemployment rate."

According to Zillow, the only sustainable solution to the affordability crisis is not through a fall in prices or mortgage rates, but through building enough to close the housing deficit.