California homeowners face one of the most challenging housing affordability landscapes in the country, and the Greater Palm Springs region serves as a poignant example of how national and statewide mortgage trends impact local communities and economies.
The Statewide Picture: Rising Costs and Mortgage-Free Living
Over the past five years, California’s mortgage market has undergone dramatic fluctuations. Ultra-low interest rates during the pandemic, at times dipping below 3.5%, created a surge in home purchases but didn’t necessarily increase borrowing. Instead, many Californians opted to pay off their loans entirely. By 2024, the number of mortgage-free homes in the state had grown by 16%, outpacing the modest 2% growth among homeowners with mortgages.
That shift reflects several forces: an aging population entering retirement with homes paid off, wealthier families able to purchase properties in cash, and buyers moving from high-cost to lower-cost states. Yet California still lags behind the national average for mortgage-free ownership: only 34% of homeowners here are debt-free, compared to 40% nationwide.
Even without a mortgage, the financial bite remains severe. California’s mortgage-free households still pay a median of $882 per month in property taxes, insurance, HOA fees, and upkeep – 40% higher than the U.S. average. For those with mortgages, the stress is greater: monthly payments averaged $3,001 in 2024, second only to Washington, D.C. and 65% above the national average.
The Greater Palm Springs Effect: Affordability on the Edge
In Greater Palm Springs, these statewide pressures translate into significant affordability challenges, particularly for first-time homebuyers. The most fundamental measure of housing well-being for first-time buyers in the state is the California Association of Realtors’ First-time Buyer Housing Affordability Index (FTB-HAI), which measures the percentage of households that can afford to purchase an entry-level home in California overall and by region.
As of the second quarter of 2025, the FTB-HAI for Riverside County reveals that only 40% of the county’s residents can afford to buy the median-priced home, which price stood at $544,000. According to C.A.R., the minimum household income necessary to secure a mortgage was $110,000. It’s essential to note that the FTB-HAI assumes a 20% down payment, which is not the only available option. In this case, the down payment would be $108,000, resulting in a monthly payment of $3,800. How many typical Greater Palm Springs households have $108,000 for the down payment? It’s likely there won’t be many, so monthly payments would be much higher with a smaller down payment.
The pain is felt most acutely among middle-income buyers. High mortgage rates make traditional financing unaffordable for many, while wealthier buyers in the luxury market – often paying cash – remain largely insulated from interest rate fluctuations. This dynamic has widened the gap between the Valley’s high-end and middle-market housing segments.
Recent declines in the 30-year fixed rate in 2025 have offered a glimmer of relief. A modest drop can mean hundreds of dollars in monthly savings on a $600,000 mortgage, potentially nudging more buyers back into the market. Still, experts caution that affordability will remain a major constraint until wages catch up.
Shifts in Sales and Inventory
After the pandemic frenzy, the Greater Palm Springs housing market is cooling into a more balanced phase. Inventory in August 2025 was up 25% year-over-year, returning to pre-pandemic levels. Homes are also staying on the market longer, with a median of 60 days to sell compared to shorter timelines a year earlier.
This slower pace has given buyers more leverage, but financing remains complicated by factors such as local short-term rental restrictions. In Palm Springs, Palm Desert, and La Quinta, buyers of properties intended for Airbnb-style rentals often must rely on Non-Qualified Mortgage (Non-QM) loans, which require higher down payments and interest rates, since federal agencies like Fannie Mae do not back short-term rental financing.
Long-Term Outlook: Demand Isn’t Going Away
Despite affordability hurdles, Greater Palm Springs remains a magnet for new residents. Remote work has enabled professionals to relocate for lifestyle reasons, while part-time residents are increasingly choosing to settle in full-time. Population growth, paired with a robust second-home market, is expected to sustain long-term housing demand.
For local businesses, this means that while the housing market may feel sluggish in the short term, demand for services tied to homeownership – from real estate and mortgage lending to construction, design, and retail – remains embedded in the desert’s economic future.
