California Is Expensive. But Housing Changes the Conversation.
There are plenty of everyday reminders that living in California costs more. You feel it when you fill the gas tank, open the utility bill, or walk out of the grocery store wondering how one bag managed to cost that much!
So when a new 2026 cost-of-living report ranked California as the third most expensive state in the country, behind only Hawaii and Massachusetts, the result probably did not surprise many people.
California's overall cost-of-living index came in at 140.5, which means costs are about 40.5% higher than the national average. That is a significant difference, but the more interesting part of the report is what happens when you look underneath that number and see which expenses are actually creating the gap:
Groceries in California are about 10.5% above the national average. Healthcare is roughly 11% higher. Utilities are about 35% higher, and transportation comes in around 42% above average. Then you get to housing, where California's index jumps to 189.5, which means housing costs are nearly 90% above the national average.
Suddenly, the California cost-of-living story looks a little different. It is not simply a story about expensive groceries, gas, or utilities. Housing is doing much of the heavy lifting, and that matters because housing is different from almost every other expense on the list. For homeowners, it’s not just something they pay for each month, it may also be their largest financial asset.
That makes California's high cost of living more complicated than simply saying, "California is expensive."
When you compare California with the rest of the country, the differences are substantial. Texas, for example, has an overall cost-of-living index of 90.7, about 9% below the national average. Oklahoma, the least expensive state in the report, comes in at 83.5. At the opposite end, Hawaii sits at 184.8, meaning its overall cost of living is nearly 85% above the national average.
Those comparisons are interesting, but people do not decide where to live based solely on a spreadsheet. Jobs matter. Family matters. Weather, schools, lifestyle, healthcare, communities, and opportunity all matter. A less expensive place is not automatically a better place for someone to live, just as a more expensive place is not automatically a worse one.
Another recent analysis looked at that idea from a different angle by asking how much quality of life people receive, relative to what it costs to live in a particular city. Cities such as Tucson, Jacksonville, and San Antonio performed especially well once affordability was factored into the equation. California's major cities landed much lower, with San Jose scoring 198, San Francisco 182, and Los Angeles 157.
That does not mean someone in San Francisco should pack up and move to Tucson! It simply shows how much geography affects purchasing power. Two people can earn similar incomes in different parts of the country and end up with very different amounts of disposable income, once housing and other local expenses are taken into account.
Even California's grocery numbers help illustrate that point. California has the highest grocery costs in the contiguous United States according to the same 2026 data, but the actual premium is about 10.5% above the national average. Housing, by comparison, is nearly 90% higher. So yes, the grocery cart costs more here, but the house where those groceries are being carried to is where the California premium really becomes noticeable.
That creates an interesting situation for people who already own property in the state.
A homeowner may still feel the same pressure everyone else feels from higher food, insurance, utility, and transportation costs. But that same homeowner may also have purchased a property 10, 15, or 20 years ago that has appreciated substantially since then. Their monthly budget may feel tight while their balance sheet tells a very different story because a large amount of wealth is sitting inside their home as equity.
That distinction is important because we see it all the time.
A homeowner finds the next house they want to buy, but most of their available wealth is tied up in the property they already own. A business owner needs capital, yet conventional underwriting does not fully reflect the strength of their overall financial position. An investor sees another property opportunity but needs to access equity from an existing property to make the transaction work.
In each of those cases, the person may be financially strong without being particularly liquid. They own something valuable, but that value is locked inside real estate.
In a state where housing costs are so much higher than the national average, that equity can become an important financial resource.
That does not mean borrowing against a property is automatically the right decision. Any loan needs to make sense for the borrower, the cost of financing needs to be considered carefully, and there needs to be a realistic plan for repayment. But sometimes the problem is not that someone lacks wealth. Sometimes the problem is that they cannot access it at the moment they need it.
And that is one of the places where Private Money can be useful!
A homeowner who wants to buy before selling may be able to use a bridge loan to access the equity in their current property and solve the timing problem, or solve the problem of not being able to show on paper that their debt to income ratio can afford two mortgages.
A business owner may be able to use available real estate equity for a quick cash-out loan for business capital. Or an investor may be able to leverage equity in one property to help pursue another opportunity.
In each scenario, the property is already part of the financial picture. The financing simply provides a way to make that equity available when conventional lending or timing does not line up with what the borrower is trying to accomplish.
There is also another reason we think statewide rankings like these need some perspective. There really is no single California cost of living. San Francisco is very different from Sacramento. Sonoma County is different from Los Angeles. Santa Rosa is different from Healdsburg. Even within one county, housing costs and opportunities can vary significantly from one community to another!
A statewide index is still useful because it shows how California compares with the rest of the country, but real financial decisions are never made at the statewide level. They are made one property, one household, and one circumstance at a time.
And that may be the most useful takeaway from all of these numbers.
California is relatively expensive, but that part is not new news. What is more interesting is understanding where those costs are concentrated and what that means for the people who already own real estate here. For buyers, high housing costs create affordability challenges. For homeowners, those same property values may have created substantial equity over time.
The Pacific Direct Mortgage Bottom Line
The 2026 numbers make one thing especially clear: California's high cost of living is largely a housing story. Our overall cost of living is about 40% above the national average, but housing costs are nearly 90% higher.
For home buyers, that makes financing and affordability increasingly important. For existing homeowners, it can mean something very different. Years of owning California real estate may have created substantial equity, even when that wealth is not sitting in a bank account.
That is where Pacific Direct Mortgage can sometimes help. We provide direct Private Money financing throughout California for borrowers who need to use their real estate equity to solve a specific problem, whether that means buying before selling, accessing cash for a business purpose, purchasing an investment property, or handling a transaction that does not fit neatly into conventional lending guidelines.
California may be an expensive place to live, but for many property owners, the real estate contributing to that high cost of living may also be one of their most valuable financial resources. Sometimes the opportunity is not in leaving California, but it’s in understanding what the property you already own may allow you to do next.
Data referenced in this article is based on Q1 2026 C2ER Cost of Living Index information published through the Missouri Economic Research and Information Center, along with 2026 Visual Capitalist analyses of cost of living, grocery costs, and quality of life relative to living costs.
Husband & Wife Team Phone: 707‑708‑0797 / Office: 1400 N. Dutton Ave #22 Santa Rosa, CA 95401 Ken: CA DRE Broker #01858042 / NMLS #1221130 Ari: CA DRE #01858152 / NMLS #2170867 Ken & Ari are a husband & wife team with combined 3+ decades in real estate and private money industries. They own Pacific Direct Mortgage & Real Estate, specializing in Private Money loans (also known as Hard Money home loans). Having helped thousands of Borrowers & working directly with Brokers, Agents and Lenders to help when needed with fast, flexible, alternative financing for real estate purchases and refinances throughout California. No issues with DTI ratios, credit issues, property condition, difficult to prove income ‑ we want to help
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