The California areas so expensive you can now only get on the property ladder by INHERITING a home
California's distorted housing market is dramatically favoring existing homeowners and their families while leaving everyone else behind.
Statewide in 2025, the inheritance transfer rate of homes was 18 percent, which is more than double the national average, according to an analysis by real-estate data firm Cotality, which was first reported by the Wall Street Journal.
In some parts of California, that figure soared above 25 percent.
In 2000, the statewide inheritance transfer rate was six percent, which means there has been a threefold increase over the past 25 years.
Most people receiving the homes would never be able to afford them on their own in a state where the median sale price for a house reached almost $900,000 in 2024, according to the latest data from the California Association of Realtors.
Nationally, the median sale price of a property in 2024 peaked at just under $430,000, according to the Federal Reserve Bank of St Louis. That's less than half the median price in California that year.
California's legal landscape surrounding the housing market is so tilted towards existing owners that in a YouTube video by Redfin's Chief Economist, Daryl Fairweather, she described the situation as a 'caste system.'
'When most people struggle to afford homeownership, but some people get to inherit homes without really trying, we don’t have a housing market,' Fairweather said. 'We have a caste system defined by family wealth.'
The inheritance transfer rate of homes across California was 18 percent in 2025, which was more than double the national average. Los Angeles, which is California's most populous city and where the transfer rate was 20 percent, is pictured
The inheritance transfer rate was just six percent in 2000, marking a threefold increase in 25 years. San Francisco, where the rate is 22 percent, is pictured
Many heirs receiving the homes would never be able to purchase them on their own, as the median sales price in the state was close to $900,000 in 2024. A young couple having the keys to a home handed to them is pictured (stock image)
Areas of California where the problem is most pronounced include Monterey, Santa Cruz, Napa and Santa Barbara - where more than a quarter of homes that transferred hands in 2025 were inherited rather than sold.
Monterey had the highest inheritance transfer rate at 28 percent, while the other three areas were tied at 27 percent.
And the issue was not just contained to affluent coastal communities. San Francisco's transfer rate stood at 22 percent, and Los Angeles, for its part, at 20 percent.
The absolute lowest inheritance transfer rate in California was in Yuba County, an inland part of the state just north of Sacramento, where the figure was eight percent. That is the same as the national average.
California's 'caste system' housing market is the culmination of decades-old laws that trace back to to 1978, when voters passed Proposition 13.
The law capped property tax increases at 2 percent a year based on the most recent purchase price, and a subsequent law in 1986 allowed homeowners to pass on those lower tax rates to their heirs.
If a person purchased a house in California in 1978, when the median sale price was around $71,000, their grandchildren could inherit tax rates hundreds of thousands of dollars below what they would pay if they bought the house at current market prices.
On top of that, state law dictates that selling a house incurs a capital gains tax based on how much its value has grown since it was purchased.
The housing market in California is so lopsided towards homeowners that Redfin's chief economist called it 'a caste system.' Houses in San Francisco are pictured
The highest inheritance transfer rate of homes in California was in Monterey, where the figure was 28 percent. An aerial view of Monterey is pictured
Tax laws dating to the 70s and 80s have created a system that heavily disincentivizes California homeowners from selling. A conceptual image of a home locked in chains is pictured
But if the house is passed on to heirs, that tax is completely waived. Homeowners are thus heavily incentivized to hold on to their keys and never sell.
Between 2010 and 2024, the median sale price of homes in California nearly tripled, from $305,631 to $877,285, according to data from the California Association of Realtors.
Using those figures, that means someone who bought a home in 2010 and wants to sell now would pay a capital gains tax on $571,654, and the number increases the further back one goes.
It is far more logical, then, for parents to hold onto their homes until they die so that their children can receive the full value of the asset.
Federal law allows single homeowners to deduct $250,000 from the capital gains tax, and $500,000 for couples, but in the more expensive parts of California where the price of homes is in the seven figures, a sale would still incur huge costs.
The state attempted to alleviate the problem with Proposition 19 in 2021, which required heirs to use inherited homes as their primary residence to keep all the generous tax breaks.
But as it turned out, most of the heirs were living in the homes anyway, and the law barely succeeded at its intended effect of increasing housing inventory.
