In June, Southern California home prices surged nearly 8% from the previous year, marking the fourth consecutive month of record-high values. The average home price across the six-county region reached $876,280, a 0.4% increase from May, according to Zillow data.

Prices increased in every county, with Los Angeles County's average hitting $892,304 and Orange County averaging $1.16 million.

These rising prices present a significant challenge for prospective homebuyers in an already costly market, particularly as interest rates remain at their highest levels in over two decades.

Only 14% of households in Los Angeles County could reasonably afford a median-priced home in the last quarter, as reported by the California Association of Realtors. The situation is somewhat better in the Inland Empire, where fewer than 30% of households in Riverside and San Bernardino counties can afford a median-priced single-family home.

Despite the steep decline in affordability since the 2000s housing bubble, there may be some relief on the horizon. Economists attribute the recent price increases to a shortage of homes for sale, although inventory levels are beginning to improve. In June, the number of homes for sale in Los Angeles County increased by 22% from the previous year, marking the third consecutive month of rising supply. Other counties experienced similar upticks.

When mortgage rates spiked in 2022, home prices initially dropped as buyers retreated and inventory grew. However, prices began to rise again last year as many homeowners opted to stay put rather than give up their low mortgage rates secured during the COVID-19 pandemic.

Now, with mortgage rates stabilizing in the 6% to 7% range, homeowners seem more willing to prioritize buying a new home over retaining a 3% mortgage. Economists and real estate agents believe that if the supply of homes for sale increases significantly, prices could eventually decrease. However, many factors suggest this may not happen soon.

California has long struggled with insufficient housing relative to demand, and the economy is growing, which, combined with homeowners' reluctance to part with their low-rate mortgages, may prevent a significant drop in home values. Experts predict that while home values may continue to rise, the rate of increase is likely to slow, allowing incomes to catch up.

June’s nearly 8% annual price increase, though still high, is lower than recent months and the smallest gain since January. Richard Green, director of the USC Lusk Center for Real Estate, notes that while it’s too early to definitively say if the price growth is slowing, a deceleration seems likely.

“Prices can’t keep rising at 8% a year indefinitely,” Green said.

The California Office of Health Care Affordability faces a monumental challenge in its efforts to curb escalating health care costs.

Established in 2022, the agency aims to make health care more affordable and accessible while improving outcomes, particularly for the state’s most disadvantaged residents. Achieving these goals will involve grappling with a complex and often dysfunctional health system, as well as with powerful industry stakeholders who are well-versed in resisting change.

The agency's success depends on its ability to unite insurers, hospitals, and medical groups in efforts to control costs, even as these entities compete in California’s $405 billion health care market. A critical part of this mission is transforming the system so that financial incentives are aligned more with delivering high-quality care rather than maximizing revenue through an endless array of services and procedures.

The outcome of these efforts remains uncertain and could take years to fully evaluate.

California joins a growing number of states setting annual health spending targets, including Connecticut, Delaware, Massachusetts, Nevada, New Jersey, Oregon, Rhode Island, and Washington. Massachusetts, the pioneer in this approach since 2013, offers a mixed record. While it managed to keep spending increases below the target in three of the first five years and below the national average, recent years have seen significant growth in health care expenditures.

In 2022, Massachusetts’ health care spending growth surpassed the state’s target by a significant margin, prompting the Health Policy Commission to warn of troubling trends that could make the system unaffordable.

Rhode Island, despite having a policy to cap hospital price increases, exceeded its overall health spending growth target in 2019. The pandemic skewed spending in 2020 and 2021, but in 2022, spending growth was half the state’s target rate. Conversely, Connecticut and Delaware both exceeded their 2022 targets.

California's approach will be a work in progress, adjusting to state policies and demographic factors that necessitate higher health care spending.

The agency is expected to face substantial resistance from the industry as it tackles high prices, unnecessary treatments, overuse of expensive care, administrative inefficiencies, and the consolidation of hospitals into fewer hands.

“If you’re telling an industry we need to slow down spending growth, you’re telling them we need to slow down your revenue growth,” says Michael Bailit, president of Bailit Health, a Massachusetts-based consulting firm. “And maybe that’s perceived as ‘we have to limit your margins.’ These are very challenging discussions.”

Key health care sectors in California have expressed concerns about the new affordability agency, even as they generally support its goals.

In April, when the agency proposed a 3% annual per capita spending growth target, the California Hospital Association argued that this target was too low, given California’s aging population, Medi-Cal investments, and other cost pressures. The association suggested a 5.3% average increase over five years, which is slightly higher than the 5.2% average annual increase in per capita health spending from 2015 to 2020.

Shortly after, the affordability board approved a slightly less ambitious target, starting at 3.5% in 2025 and decreasing to 3% by 2029. The California Hospital Association expressed disappointment, stating that the new target still did not adequately address demographic changes, increased need for mental health and addiction treatment, and labor shortages.

The California Medical Association echoed similar concerns, noting that while the new target was “less unreasonable” than the initial proposal, it still posed potential risks to patient access and care quality.

Despite the challenges, California’s initiative deserves recognition for its ambitious goals and the motivation behind them: to introduce financial rationality and provide relief for millions of Californians who often forego necessary medical care due to cost concerns.

Sushmita Morris, a Pasadena resident, experienced this firsthand when she received a $4,600 bill for a procedure at the University of Southern California’s Keck Hospital. Despite multiple attempts to obtain an itemized bill, Morris faced robotic responses and has refused to pay the bill, anticipating action from a collection agency.

The path to more affordable health care will be long and fraught with challenges, including unforeseen events that could shift the landscape and require flexibility.

California’s spending cap may not apply to all health care institutions, industry segments, or regions if they can justify higher spending due to factors like aging populations or increased labor costs. For those exceeding the limit without such justification, the initial step will be a performance improvement plan, with potential financial penalties for non-compliance, possibly not before 2030 due to data collection and review timelines.

Experts, consumer advocates, and officials in California believe that meaningful engagement and robust, institution-specific data will enhance transparency and accountability.

Richard Kronick, a public health professor at UC San Diego and a board member, notes the current lack of public data on cost trends at specific institutions but anticipates that future availability of such data will create pressure for improvement.