California has long been a magnet for the affluent, drawn by its tech hubs, luxury real estate, and iconic lifestyle. However, the state’s soaring cost of living and surging housing prices are prompting even wealthy transplants to think twice. Recent data paints a sobering picture of the financial realities facing newcomers and long-time residents alike.
The True Cost of Living in California
California’s cost of living is now 50% higher than the national average, making it one of the most expensive states in the US. Housing costs are the primary driver, standing at a staggering 116% above the national average. Utilities, food, healthcare, and transportation also significantly outpace national norms, with utilities 31% higher, groceries 12% higher, healthcare 15% higher, and transportation 38% higher.
For perspective, the average Californian spends about $53,082 annually on basic living expenses, or roughly $9,423 per month. Even bachelors face steep monthly costs, with accommodation alone ranging from $1,500 to $3,500 per month.
Housing Affordability Crisis
The housing market is at the heart of California’s affordability challenge. As of the first quarter of 2025, the median price for a mid-tier home in California is more than double that of the typical US home. Monthly payments for a newly purchased mid-tier home-including mortgage, taxes, and insurance-are now close to $5,900, an 82% increase since January 2020. For entry-level buyers, monthly payments exceed $3,500, reflecting an 87% jump since 2020.
This dramatic escalation is driven by both rising home prices and higher mortgage rates, pushing the gap between the cost of buying and renting to levels not seen since the mid-2000s housing bubble.
City-by-City Breakdown
The financial burden varies across California’s cities, but even the most “affordable” areas remain costly compared to the national average. For example:
- Sunnyvale: 126% higher than the national average
- San Jose: 81% higher
- San Francisco: 67% higher
- Los Angeles: 49% higher
- San Diego: 45% higher
Even cities like Bakersfield and Fresno, often considered more affordable, are still 12% and 8% above the national average, respectively.
Inflation and Everyday Expenses
Inflation continues to erode purchasing power. The Los Angeles area saw a 3.0% rise in the Consumer Price Index in the 12 months ending April 2025, with core expenses like housing and services leading the increase. Non-essential expenses, such as entertainment and grooming, are also 24% higher than the national average.
Wealthy Transplants Rethink Relocation
While high-income earners once viewed California as a land of opportunity, the financial calculus is shifting. The relentless rise in living and housing costs is causing some to reconsider relocation, especially as remote work and lower-tax alternatives in other states become more attractive. The state’s third-highest cost of living index in the nation (142.2) underscores the challenge, with only Hawaii and Massachusetts ranking higher.
Conclusion
California’s financial reality check is undeniable. The state’s high cost of living-driven by extraordinary housing prices, elevated everyday expenses, and persistent inflation-is prompting even wealthy transplants to pause and reconsider. As affordability concerns mount and the gap between California and the rest of the country widens, the Golden State faces a critical juncture: adapt to retain its allure, or risk losing the very people who once saw it as the ultimate destination.
Source:
[1] https://www.bls.gov/regions/west/news-release/consumerpriceindex_losangeles.htm
[2] https://www.rentcafe.com/cost-of-living-calculator/us/ca/
[3] https://www.godigit.com/guides/cost-of-living/cost-of-living-in-california
[4] https://www.dir.ca.gov/oprl/cpi/entireccpi.pdf
[5] https://lao.ca.gov/LAOEconTax/Article/Detail/793
[6] https://worldpopulationreview.com/state-rankings/cost-of-living-index-by-state
[7] https://www.numbeo.com/cost-of-living/rankings.jsp
[8] https://www.lahomes.com/blog/california-cost-of-living-guide/