March 2026
White House Executive Orders Target Housing Supply and Mortgage Credit
Last week, President Trump signed a pair of executive orders aimed at increasing the U.S. housing supply and consumer access to mortgage credit.
One of the orders directs various federal agencies — including the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA) — to work together on reviewing and revising a number of regulations related to the permitting and construction of new homes.
A second order, among other things, seeks to expand the definition of qualified mortgages under the supervision of the Consumer Financial Protection Bureau (CFPB); creates tailored capital requirements for all banks, including community banks; and modernizes the appraisal process by allowing for expanded use of AI-driven valuations.
Senate Moves Forward on Major Housing Supply Bill
The U.S. Senate on Thursday overwhelmingly passed the 21st Century ROAD to Housing Act.
This legislation equips communities with new tools and resources to plan for growth, streamlines federal processes that can slow housing development and strengthens financing options for manufactured and rural housing.
It also modernizes key federal programs, including the HOME Investment Partnerships Program, helping to broaden access to homeownership, improves access to credit for home buyers and ensures veterans are able to fully use their benefits through the VA Home Loan Program.
The package now moves to the House, where it faces opposition from members of both parties.
Market Update
Recent U.S. data offer some encouraging signs: February CPI held steady, small-business pricing plans cooled, and one-year inflation expectations fell. Housing policy also moved forward as the Senate advanced a major affordability bill. Still, the outlook remains clouded by uncertainty from the Middle East conflict, which is already lifting energy prices and could reaccelerate inflation. January housing starts were strong, but softer permits point to ongoing constraints from high costs and limited affordability.
Keller Williams Agrees to Settle Batton Homebuyer Commission Lawsuit
Keller Williams announced on Feb. 2 that it will pay $20 million to settle the Batton home buyer commission lawsuit. The suit alleges that NAR, Anywhere Real Estate (now Compass International Holdings), REMAX and Keller Williams Realty participated in a “decades-long, nationwide antitrust conspiracy” that resulted in homebuyers paying “billions in overcharges.”
According to the firm, under the terms of the settlement all “KWRI franchisees, agents, and teams are released from antitrust claims by all persons who purchased residential real estate that was listed on a MLS during the relevant time period.”
Keller Williams is the first of the Batton defendants to settle the lawsuit. Keller Williams’ CEO Chris Czarnecki noted that the goal of the settlement was to eliminate uncertainty for Keller Williams’ franchisees and agents.
NAR said it will continue to pursue all legal options to achieve a result that best serves the interest of members, the industry, and consumers.
Real Estate Impacts of Partial Government Shutdown
The Federal government has entered a brief, partial shutdown until legislators can agree on spending, but the shutdown is expected to be very brief. For California REALTORS®, the most critical housing and mortgage programs – HUD/FHA, VA, and the conforming mortgage guarantors (Fannie Mae and Freddie Mac) – are structured to maintain core functions throughout the government shutdown. The IRS is among the agencies that would see funding lapse, but any effect is expected to be short and cause minimal delays.
REALTORS® with active transactions should prepare clients for the possibility of slight delays where staff approvals or third-party verifications are required.
Market Update
Recent economic indicators point to a housing market navigating a delicate balance between improving financing conditions and softening demand fundamentals. Mortgage rates held somewhat steady following the Federal Reserve’s cautious pause, yet slower employment growth along with elevated home-purchase cancellations and rising rental vacancies highlighted ongoing affordability pressures and shifting supply-demand dynamics. Adding to this cautious backdrop, consumer confidence has retreated to a multi-year low, signaling growing household uncertainty that could further moderate housing activity.
C.A.R. President Urges Leaders to Prioritize Homeownership
More than 80% of families cannot afford a median-priced home, the income needed for first-time buyers has nearly doubled, and first-time buyers nationwide are now older than ever, according to an op-ed written by C.A.R. President Tamara Suminski and published last week in the Sacramento Bee.
In the op-ed, Suminski states that California’s housing crisis cannot be solved without prioritizing pathways to homeownership. She emphasizes that homeownership is a key driver of long-term housing security, generational wealth, and community stability. However, it is increasingly out of reach for most Californians due to soaring home prices, stagnant wages, and widening affordability gaps.
Suminski warns that the disconnect between income and housing costs threatens California’s economic future, as essential workers are priced out of the communities they serve and many families leave the state entirely.
To expand homeownership opportunities, Suminski calls for two main policy actions:
Make it easier to build owner-occupied housing by reducing frivolous litigation and investing in infrastructure that supports homebuilding.
Protect the existing housing stock from corporate investors by incentivizing institutional owners to return single-family homes to owner-occupancy.
Read the complete op-ed at the link below and share it with your clients to show how REALTORS® are advocating for them.
California’s largest insurers raise rates and expand coverage
Source: KMPH
The two largest home insurance companies in California are raising rates and expanding coverage in fire zones. Mercury and AAA’s company, called CSAA, are increasing rates, but these rates are largely determined by the area code of the home. According to filings with the California Department of Insurance, AAA will raise rates by about 7 percent for 481,000 homeowners in Central and Northern California starting in March. Mercury plans to raise rates by about 8 percent for more than 650,000 homeowners.
These rate hikes were approved by the state’s insurance commissioner in exchange for the insurance companies writing more policies in parts of the state where insurance is not readily available, such as in fire zones. Both insurance companies say the reason they’re bumping up rates is because of inflation and the greater risk of a catastrophic fire. People can get discounts if they clear out defensible space, build decks with fire-proof materials, or install devices to monitor water leaks.
Trump moves to bar Wall Street from buying single-family homes
Source: Time
President Trump has signed an executive order that his administration contends will help lower housing prices and stoke affordability by placing restrictions on big investors’ home purchases. But experts say that its impact for homebuyers and the broader market will be minor.
The order directs agencies to promote home sales to individual buyers and restrict federal programs from enabling big investors to acquire single-family homes by approving, insuring, guaranteeing, securitizing or facilitating such sales. It also instructs the Treasury Secretary to consider revising rules and guidance related to large institutional investors acquiring single-family homes and directs and attorney General and Federal Trade Commission to review such investors’ acquisitions in the single-family home rental market for anti-competitive effects and prioritize enforcement of antitrust laws to target those practices. Experts estimate that roughly 3.8 percent of single-family rental homes are owned by institutional investors, who do not generally rely on governmental backing.
Builder sentiment falls as industry expects improvements in 2026
Source: Homes.com
The National Association of Home Builders/Wells Fargo Housing Market Index published Friday found homebuilder sentiment of new home sales dropped deeper into negative territory with a reading of 37, down two points from December. Any measure over 50 is seen as positive.
Sentiment has not been positive since April 2024, and the highest reading in 2025 was 47 in January. But homebuilders’ perspective on new home sales for the next six months paints a different picture: that portion of the index has posted significantly higher continuously. Some homebuilders are holding out high hopes for the spring selling season, with lots of movement for entry-level buyers and high-end buyers.
U.S. consumer sentiment rises in January, but still below last year
Source: Fox Business
Consumer sentiment ticked higher in early January despite lingering concerns about inflation and a weak labor market, according to the latest release from the University of Michigan’s Survey of Consumers. Michigan’s Consumer Sentiment Index rose to 54 in January’s preliminary reading from a final reading of 52.9 in December.
That was a larger increase than expected by economists, who anticipated the January figure would come in at 53.3, however, January’s reading of 54 was significantly below the 71.1 reading a year ago in January 2025. The report found that year-ahead inflation expectations were steady at 4.2 percent to start January, which is the lowest reading since January 2025 but well above that month’s 3.3 percent inflation expectations. Consumers continue to focus primarily on “kitchen-table issues” like high prices and softening labor markets.
Mortgage refinance surged again, but rates now jumping higher
Source: CNBC
Mortgage refinancing jumped sharply higher for the second straight week, as interest rates fell further, but that boom bay be about to bust. Interest rates are now moving much higher. Last week, applications to refinance a home loan rose 20 percent compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Applications were 183 percent higher than the same week one year ago.
The average contract interest rate on the 30-year fixed-rate mortgage with conforming loan balances ($806,500 or less) decreased to 6.16 percent from 6.18 percent, with points falling to 0.54 from 0.56, including the origination fee, for loans with a 20 percent down payment. That is the lowest rate since September 2024. Applications for a mortgage to purchase a home rose 5 percent from the prior week and were 18 percent higher year-over-year. Homebuyers are still contending with high home prices and continued uncertainty in the broader economy. There are more homes available for sale, but affordability is still a major impediment.
Federal Reserve cuts interest rates by 0.25%
Source: Yahoo! Business
The Federal Reserve cut interest rates by 25 basis points at the conclusion of its two-day meeting on Wednesday, marking the central bank’s third cut of the year. Fed officials were split on the decision to lower rates to a range of 3.50 percent to 3.75 percent, with policymakers dissenting on both sides.
Fed Chair Jerome Powell underscored that the Fed remains in a “challenging” position, with both sides of its dual mandate in tension. Powell reiterated that the Fed has tilted the balance of its risk-management framework toward the labor market after previously favoring the inflation mandate. Though he affirmed that there is no risk-free path for policy as the Fed navigates competing issues with employment and inflation, he noted their obligation to ensure that the short-term effects of tariffs on inflation do not cause ongoing issues.
A housing reset is coming in 2026 as income growth outpaces home-price growth
Source: MSN
Homebuyers may experience a reprieve in 2026 as price normalization and an increase in home sales over the next year will take some pressure off the market – but don’t expect homebuying to be affordable in the short run for Gen Z and young families.
The “Great Housing Reset” will start next year, with income growth outpacing home-price growth for a prolonged period for the first time since the Great Recession era, according to a Redfin report released this week. The report predicts mortgage rates reducing to the low 6 percent range, down from the 2025 average of 6.6 percent; and median home sales prices increasing by just 1 percent, instead of 2025’s 2 percent. It predicts that monthly housing payment growth will lag behind wage growth, which will remain steady at 4 percent. These trends toward increased affordability will likely bring back some house hunters to the market.
Consumer sentiment improved slightly in early December
Source: Consumer Affairs
The University of Michigan’s preliminary reading for its monthly consumer-sentiment survey shows a moderate rebound after months of decline. The index rose modestly to 53.3 – a gain of 2.3 points over November’s reading. Though the index remains far below the roughly 71.1 level seen in January, survey respondents reported improved expectations for the future, in terms of personal finances and the economy at large.
The survey reported that perceived financial prospects rose sharply – a 13 percent increase in those expecting their personal finances to improve over the coming year, no matter the respondents’ ages, incomes, education levels or political affiliations. Respondents also expected inflation to slow and for prices to stabilize somewhat. However, prices are still high, and labor market worries and economic uncertainty persist. Regardless, if more people feel confident about their finances and inflation is expected to ease, that could translate into increased spending over the holidays, supporting retailers and service industries.
Mortgage arrears edge higher as affordability squeezes borrowers
Source: MPA Mag
Mortgage delinquencies are expected to inch higher in 2026 as affordability pressures and softer labor markets test borrowers, according to credit rating agency TransUnion’s latest consumer credit outlook. The projections point to a slow turn in the credit cycle rather than a sharp deterioration, but one that mortgage professionals are watching closely.
In its 2026 Consumer Credit Forecast, TransUnion projected the share of U.S. mortgages 60 days or more past due to reach 1.65 percent by December 2026, an 11-basis-point increase from 2025, driven in part by a modest rise in unemployment. By contrast, serious credit card delinquencies are expected to remain almost flat at 2.57 percent.
Refinance demand for FHA loans jumps 24%
Source: CNBC
Current homeowners are looking for any savings they can get, and with mortgage rates on conventional loans not moving much, that isn’t easy. Loans from the Federal Housing Administration (FHA), which require mortgage insurance, however, are providing an outlet. Total applications to refinance a home loan rose 14 percent last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 88 percent higher than the same week one year ago. The refinance share of mortgage activity increased to 58.2 percent of total applications from 53.0 percent the prior week. Demand for FHA refinances was up 24 percent for the week, as the FHA interest rate for 30-year fixed-rate loans fell to 6.08 percent – the lowest level since September 2024.
In contrast, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less), increased to 6.33 percent from 6.32 percent, with points rising to 0.60 from 0.58 including the origination fee, for loans with a 20 percent down payment. Applications for a mortgage to purchase a home dropped 2 percent for the week and were 19 percent higher than the same week one year ago.
FHA Loan Limit Increases to $1.25 Million in 2026
The Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) said it will raise the maximum claim amount for its Single-Family Forward and Home Equity Conversion Mortgage (HECM) mortgage insurance programs to $1,249,125 in 2026, up from $1,209,750 this year.
FHA updates its loan limits every year based on rules in the National Housing Act. These limits are calculated using home-sale data from each county or metropolitan area. The law sets three cost tiers, and FHA adjusts the limits according to local home prices.
The law also caps the loan limit in high-cost areas at 150% of the national conforming loan limit, which is set by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac.
The new limit is a 3.3 percent increase of $39,375, marking the 10th straight year of increases.
Loan limits for most of the country will increase due to the continued appreciation of home prices over the past year.
Market Update
As 2026 approaches, the U.S. economy is at a crossroads—marked by a cautious Federal Reserve, resilient small businesses, and shifting consumer moods. From surprising optimism on Main Street to rising jobless claims and mounting foreclosure rates, news from last week unpacks the forces shaping America’s financial outlook and reveals how uncertainty and adaptation are defining the path forward
State Housing Programs Award $181 Million to Support Lower-Income Homeownership
Governor Gavin Newsom announced nearly $181.1 million in grant funding to revitalize communities and increase homeownership opportunities for 1,275 lower-income California households — including agricultural workers and their families. The funding was provided through a streamlined process created by the Newsom administration to help simplify the process for communities to access funding and create housing.
“Homeownership is one of the greatest tools for creating generational financial security, and one that is increasingly difficult to attain,” said California Business, Consumer Services and Housing Agency Secretary Tomiquia Moss. “Through CalHOME and the Serna program, we are working with amazing partners to address historical inequities in homeownership, strengthening California communities.”
The CalHOME program and Joe Serna Jr. Farmworker Housing (Serna, or FWHG) awards, administered by the California Department of Housing and Community Development (HCD), will create 74 CalHOME projects in 22 California counties and benefit 1,172 households, while six Serna homeownership projects are expected to help another 103 farmworker households. To date, the HOSN program has awarded $447.57 million to help 4,074 California households in 40 California counties attain or maintain homeownership. In just two years, the Serna program has extended homeownership opportunities to 192 farmworker families.
California home sales hit highest level since September 2022
Source: Realtor.com
The California housing market is seeing an uptick as home sales in the Golden State have reached the highest level since September 2022, according to the CALIFORNIA ASSOCIATION OF REALTORS®. Existing, single-family home sales totaled 287,940 in November 2025 on a seasonally adjusted annualized rate, up 1.9 percent from 282,590 in October and up 2.6 percent from 280,530 in November 2024.
The annualized figure reflects the number of homes that would be sold in 2025 if November’s sales pace continued throughout the year, with adjustments made for typical seasonal patterns. Cumulatively, total home sales through the first 11 months of 2025 also remained above last year’s levels, says the new C.A.R. report. The increase is due to a surge in demand in certain areas. While only 25 of the 53 counties tracked by C.A.R. posted year-over-year sales gains in November, many had double-digit increases. Gains were led by Trinity County with a 60 percent surge, followed by Imperial (46.7 percent) and Mendocino (43.3 percent).
Homebuilders expect sales to improve in 2026 as interest rates fall
Source: Realtor.com
Homebuilder sentiment remained muted in December as the industry faces challenging conditions, but builders are hopeful that things will turn around in 2026 as interest rates ease. Overall builder confidence in the market for newly built single-family homes remained low at 39 this month, up 1 point from November, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Monday. Any reading below 50 reflects negative sentiment about the market.
However, sales expectations for the next six months rose one point to 52, indicating a positive outlook about the first half of 2026 following the Federal Reserve’s three interest rate cuts since September. Homebuilders benefit especially from falling interest rates, as they reduce the cost of construction loans used to finance new projects, as well as potentially lower mortgage rates for their customers.
VA lending took a sharp upturn in 2025
Source: HousingWire
The U.S. Department of Veterans Affairs (VA) home loan program rebounded sharply in 2025, according to a new analysis from Veterans United Home Loans. The rebound reverses last year’s slowdown and highlights the program’s continued appeal for service members and veterans.
VA loan count rose 26.8 percent to 528,343 loans closed in fiscal year 2025, up from 416,363 in fiscal year 2024. Much of the growth came from a steadier purchase market and a surge in refinancing, signaling renewed confidence amid ongoing affordability challenges.
Mortgage rates move higher after the Fed rate cut, causing loan demand
Source: CNBC
The Federal Reserve cut its benchmark interest rate last week, and just as happened the last two times, mortgage rates rose. That caused demand for home loans and refinances to drop. Total mortgage application volume fell 3.8 percent last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) increased to 6.38 percent from 6.33 percent, with points rising to 0.62 from 0.60, including the origination fee, for loans with a 20 percent down payment. Applications to refinance a home loan fell 4 percent for the week and were 86 percent higher than the same week one year ago. Applications for a mortgage to purchase a home fell 3 percent for the week and were 13 percent higher year-over-year. Purchase application volume typically drops off quickly at the end of the year.
Credit score rules for mortgages changing in 2026 may help first-time homebuyers
KSTP
Credit score rules for mortgages are changing in 2026, which may help first-time homebuyers. For years, the minimum FICO score to get a loan for most borrowers has been 620. Now, companies that provide capital to the mortgage market have removed that requirement. They’re expanding the scope of credit profiles to include utility and rental payment history.
Older FICO scores did not include utilities or rental payments, so the change may give a better profile picture of a person’s creditworthiness. Experts say the credit profiles may expand access to credit for first-time homebuyers, young adults and renters.
Homebuilder Lennar cuts prices 10% as buyers face affordability crisis
Source: Realtor.com
Homebuilder Lennar says it cut the average price of its homes 10 percent last quarter amid weak demand from homebuyers struggling with affordability and worried about the economy. Lennar said the price cuts were primarily due to an increased use of sales incentives offered to homebuyers, which the company used to boost home deliveries by 4 percent year over year despite ongoing weakness in the housing market.
Lennar expects its gross margin on home sales to fall to between 15 percent and 16 percent in the current quarter, also lower than the 16.9 percent forecast that analysts had expected to hear. Realtor.com Senior Economist Joel Berner said that “the biggest source of pressure on builders, which is also the main things holding back the market, is weak buyer demand. Stubbornly high mortgage rates combined with the rising cost of living and heaps of economic uncertainty are making would-be homebuyers reluctant to purchase and more demanding of bargains.” In addition to a weak housing market, homebuilders are facing rising costs due to tariffs and labor shortages, adding pressure to move inventory off their balance sheets. In response, builders are cutting prices and offering attractive buyer incentives to entice home shoppers to choose them over sellers of existing homes. This is great news for buyers who can find exceptional deals on newly built homes right now.
Home prices surge in rural counties, outpacing top urban areas
Source: Realtor.com
After decades of young professionals flocking to large metros in search of well-paying jobs and lifestyle amenities, the American heartland is seeing a resurgence, with rural counties posting massive home price increases far outpacing those in urban centers. From November 2019 to November 2025, nonmetro counties, which are synonymous with rural locales, experienced a median listing price increase exceeding 70 percent, while in-metro counties saw home prices rise just over 30 percent, according to a new housing data analysis from Realtor.com.
Most of the outlying regions that saw the biggest gains were in the Midwest and South. On the other side of the spectrum, some of the nation’s largest, priciest and most populous urban counties saw far more modest price gains from November 2019 to November 2025, including Orange County and Los Angeles County, both in California. Orange County’s median home list price increased 55 percent over six years, with the typical home there costing $1.27 million last month, while prices in Los Angeles rose by just over 34 percent.
U.S. economy grew more than expected as Trump’s tariffs took hold
Source: AOL
Federal government data released last week showed that the U.S. economy had expanded more than expected as President Trump’s tariffs took hold over recent months. U.S. gross domestic product, or GDP, increased at an annualized rate of 3 percent over three months ending in June. The figured marked a sharp acceleration from an annualized contraction of -0.5 percent over the first three months of 2025.
The reading amounted to sturdy economic growth, suggesting the economy has continued to avert a significant tariff-induced cooldown. A boost in consumer spending helped propel the economic surge, the U.S. Commerce Dept. said. The government’s GDP formula subtracts imports in an effort to exclude foreign production from the calculation of total goods and services. Changes in the reading on this account reveal neither underlying economic weakness nor strength. The measure of the GDP fell over the first three months of the year, largely due to a surge of imports as firms stockpiled inventory to avoid far-reaching tariffs. Conversely, the drop-off in imports over the second quarter may have inflated the second-quarter GDP figure.
November home sales struggle as supply stalls
Source: CNBC
High home prices, stubbornly high mortgage rates and now less supply are all weighing on potential homebuyers. Sales of previously owned homes rose just 0.5 percent in November from October and were 1 percent lower than November 2024, according to the National Association of REALTORS®. Sales came in at an annualized rate of 4.13 million units.
This count is based on closings, so it reflects contracts likely signed in September and October, when mortgage rates initially came down slightly but then stayed in a tight range. Supply, which had been gaining for much of this year, fell in November. There were 1.43 million homes for sale at the end of the month, down 5.9 percent from October but up 7.5 percent year over year. At the current sales pace, that represents a 4.2-month supply. A six-month supply is considered balanced between buyer and seller.
Home Sellers Step Back, Despite Three-year High in Affordability
Seasonal cooling is finally seeping into the housing market after an unseasonably active fall, according to the latest market report from Zillow. Price cuts from sellers dropped back to normal levels from near-record highs; a rare instance of buyers losing a bit of leverage in a year when many housing trends moved in their favor.
Low mortgage rates in September and October pushed buyers and sellers to be more active than usual. But November saw a return to seasonality, despite mortgage rates that ticked down to 2025 lows.
Homeowners without a need to sell are likely deciding to wait out the winter. New listings from sellers fell sharply, nearly 30% month over month — the largest monthly November decline since at least 2018. This reversed annual growth in new listings, from 5.1% year over year in October to a 4.4% annual decline in November.
Builder Sentiment Inches Higher but Ends the Year in Negative Territory
Builder confidence inched higher to end the year but still remains well into negative territory as builders continue to grapple with rising construction costs, tariff and economic uncertainty, and many potential buyers remaining on the sidelines due to affordability concerns.
Builder confidence in the market for newly built single-family homes rose one point to 39 in December, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. Sentiment levels were below the breakeven point of 50 every month in 2025 and ranged in the high 30s in the final quarter of the year.
November/December 2025
Federal housing programs to resume following government spending deal
Source: National Association of REALTORS
Federal housing programs will be back online after President Trump signed a bill to end the longest government shutdown in U.S. history.
Federal programs critical to the U.S. housing market are set to resume after the U.S. House of Representatives on Wednesday approved legislation to fund the government and end the longest shutdown in American history.
The agreement funds the federal government, including federal housing programs, and provides an extension of insurance-writing authority for the National Flood Insurance Program (NFIP) through Jan. 30, 2026.
The Trump administration is ‘actively evaluating’ portable mortgages. What you need to know
Source: CNN
The Trump administration, through Federal Housing Finance Agency Director Bill Pulte, announced it is actively evaluating the concept of “portable mortgages.” This proposal would allow homeowners to transfer their current mortgage rate when they move to a new house. The goal is to address the low housing supply in the current market.
Many existing homeowners hold mortgage rates below 4%, according to a Redfin analysis, making them hesitant to sell and take on new mortgages at today’s average rates, which are stuck between 6% and 7%. By making lower rates portable, the administration hopes to incentivize these homeowners to move, thus freeing up inventory. However, experts like Susan Wachter of the Wharton School have raised questions about the feasibility and potential overall impact on mortgage rates.
Many would-be buyers are frozen out of the housing market
Source: NPR
First-time homebuyers are getting older and accounted for only about one in five homes sold during the 12 months ending in June. That’s a record low and half the share of first-time buyers a generation ago.
Part of the problem is that people who already own homes, often with much lower mortgage rates, are staying in their homes longer than they used to – a record 11 years, on average, according to a new report from the National Association of REALTORS®. That means fewer houses are available for buyers.
The overall shortage of homes is compounded by the high price of other necessities, which makes it hard for first-time buyers to save up for a down payment.
Data shows trouble for U.S. housing market
Source: CNN
Mortgage rates have retreated, but homebuyers aren’t looking to jump in.
Pending home sales were up just 0.7% in late October, the smallest gain in four months, even with the average mortgage rates dropping to their lowest level in a year.
Lower borrowing costs could bring shoppers off the sidelines, but stubbornly high rates and economic uncertainty continue keeping wallets closed.
According to Redin and as reported by Business Wire, the typical home is now taking 48 days to sell, the slowest October pace since 2019. Buyers have gotten cautious and picky, and they’re waiting for a deal that feels right.
Trump proposes 50-year mortgage to help affordability
Source: Housingwire
President Trump proposed 50-year mortgages to improve housing affordability by lowering monthly payments. While longer terms reduce payments, they also slow equity buildup and are currently not allowed under the Dodd-Frank Act.
The president has been focused on the issue of housing affordability throughout his term, leading off on inauguration day with an executive order for emergency price relief in housing. He also pressured Federal Reserve Chair Jerome Powell to lower interest rates and launched investigations against Fed members and tried to fire them to try to achieve lower rates.
Mortgage demand from homebuyers hits highest level since September, despite rising interest rates
Source: CNBC
Mortgage applications to purchase a home rose 6% last week to their strongest pace since September, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 31% higher than the same week one year ago.
This came despite the fact that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, increased to 6.34% from 6.31%, with points rising to 0.62 from 0.58, including the origination fee, for loans with a 20% down payment. That rate is 52 basis points lower than it was one year ago.
California’s housing market gets a boost in October
Source: Mortgage Professional America Magazine
California’s housing market showed signs of renewed activity in October, with existing single-family home sales climbing to their highest level since February, according to the latest data from the California Association of Realtors (C.A.R.).
The state recorded a seasonally adjusted annualized rate of 282,590 home sales, up 1.9% from September and 4.1% higher than a year ago.
How destructive weather is stirring up home insurance storms
Source: Real Estate News
As severe climate events hit more areas of the country, considerations around purchasing and owning a home are changing for many Americans — even if they don’t realize it yet.
These events are having a direct impact on the cost and availability of homeowners insurance, which, in turn, has longer-term implications for real estate consumers and brokerages.
NAR Report: Americans are buying homes farther from work and waiting longer to do it
Source: WAV Group
According to the NAR’s just-released 2025 Profile of Home Buyers and Sellers, the number of buyers who cited proximity to their job as a top factor in choosing their neighborhood has dropped to just 31%. That’s nearly half the share from 2014, when it was 52%. It’s a striking reversal, given that many employers have tightened their return-to-office policies over the past year.
Today’s homebuyers are the oldest in modern history. The median age hit 59, while first-time buyers are now on average 40 years old, up from 38 last year and the late 20s in the 1980s. With age comes equity and flexibility. More repeat buyers, now with years of appreciation in their pocket, are making larger down payments (23%) or paying cash (30%), giving them freedom to move for lifestyle reasons instead of job proximity.
Half of repeat buyers are over 62, and nearly one in five cite being closer to friends and family as their top motivation, a theme echoed throughout the report. Affordability challenges have slowed the entry of younger buyers, but older generations are still buying, just differently.
LA-OC homeowners face $1,610 in ‘hidden’ monthly costs
Source: Daily Breeze
“Hidden” costs can significantly increase the financial burden of homeownership in Los Angeles and Orange counties.
According to Zillow, a typical household budget for an LA-Orange County homeowner should also include an additional $1,610 for maintenance costs. The region’s extra housing costs rank sixth-highest among 30 large metropolitan areas studied nationwide.
Using Zillow’s home value estimate for LA-Orange County and a 6.4% 30-year loan — assuming a 20% down payment – a typical buyer today would face an estimated monthly payment of $4,794 on a $949,000 residence. That’s the second-highest payment among the 30 markets tracked. No. 1 was San Francisco, by the way.
Mortgage rates hit highest level in a month, pushing loan demand down 5%
Source: CNBC
Mortgage rates rose for the third consecutive week, causing demand from both current homeowners and potential homebuyers to drop. Total mortgage application volume fell 5.2% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, increased last week to 6.37% from 6.34%, with points remaining unchanged at 0.62, including the origination fee, for loans with a 20% down payment. That is the highest level in four weeks.
California housing affordability improved in Q3 2025
Source: C.A.R.
Slower home price growth and more favorable interest rates in third-quarter 2025 buoyed California’s housing affordability from both the previous quarter and a year ago, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ Traditional Housing Affordability Index (HAI). Sixteen percent of the state’s homebuyers could afford to purchase a median-priced, existing single-family home in California in third-quarter 2025, up from 14 percent in the second quarter of 2025 and 15 percent in the third quarter of 2024.
Interest rates started the third quarter on a downward trend but have climbed since bottoming out in early September. With the dwindling chance of another sizable Fed rate cut in 2025 due to a stronger-than-expected economy, mortgage rates shot back up above 7 percent in recent weeks, reaching their highest levels since early July. Rates could still come down before the end of the year, but the odds of a meaningful decline in the next couple months have reduced sharply from where they were three months ago.
SF homes selling at fastest rate among large U.S. cities
Source: San Francisco Chronicle
San Francisco homes are selling faster than they have in years – faster, in fact, than almost any of the 25-most-populous cities in the U.S. The median home sold in September found a buyer after just three weeks (or 21 days) on the market. That’s more than a month faster than the national figure of 51 days.
San Francisco and San Jose (both with just 21 days on market on average) stand out sharply from other large U.S. cities, where prospective buyers appear reluctant to place bids amid a struggling job market and high mortgage rates. But the rise of artificial intelligence companies in San Francisco has brought a wave of workers flush with cash. The AI boom has already caused rentals to fly off the market, while home sellers now have even less reason to soften their expectations. Homes in San Diego typically take 35 days to sell, while homes in Los Angeles typically spent 61 days on market as of September.
Mortgage rates jump 20 basis points following Fed cut
Source: CNBC
While the Federal Reserve cut its benchmark interest rate last week, mortgage rates responded by doing just the opposite. The average rate on the 30-year fixed mortgage jumped 20 basis points after Fed Chairman Jerome Powell announced the cut. This happened the last time the Fed lowered its rate as well, and the reason is simple: the bond market had already priced in a cut but didn’t like the commentary from Powell.
According to Mortgage News Daily COO Matthew Graham, the market was 100 percent certain of another rate cut in December. The Fed was not as certain, and Powell made a point to say so during questions at a press conference. The result was a mild re-set in yields back to levels that are more consistent with a December cut being a solid possibility but not a certainty.
U.S. economy added 42,000 private-sector jobs in October
Source: CNN
Private-sector job creation bounced back in October, according to a snapshot of the labor market that has become more closely watched in the absence of official federal jobs data. Payroll processing company ADP on Wednesday estimated that private-sector businesses added an estimated 42,000 jobs last month, a swing into positive territory after back-to-back months of job losses.
While October marked a return to job growth, ADP’s chief economist cautioned that the pace of hiring is running far slower than earlier this year and far more concentrated in a few sectors. The largest job gains were spread across industries such as trade, transportation and utilities (+47,000 jobs); education and health services (+26,000 jobs); and financial activities (+11,000), ADP reported. Those posting the biggest job losses were information (17,000 jobs lost), professional and business services (15,000 jobs lost), and leisure and hospitality (6,000 jobs lost).
First-time homebuyer share falls to historic low of 21%
Source: NAR
The share of first-time homebuyers dropped to a record low of 21 percent across the United States, according to the NATIONAL ASSOCIATION OF REALTORS®’ 2025 Profile of Home Buyers and Sellers.
According to NAR Deputy Chief Economist and VP of Research Jessica Lautz, the historically low share of first-time buyers underscores the real-world consequences of a housing market starved for affordable inventory. The share of first-time buyers in the market has contracted by 50 percent since 2007 – right before the Great Recession. Buyers with significant housing equity are making larger down payments and all-cash offers, while first-time buyers continue to struggle to enter the market. First-time buyers’ median age rose to 40 years old, and they typically paid a down payment of 10 percent, using personal savings (59 percent), financial assets such as 401(k)s, stocks or cryptocurrency (26 percent), and gifts and/or loans from family and friends (22 percent). The median age of repeat buyers was 62 years old, paying a 23 percent down payment.
In a volatile week for interest rates, mortgage demand pulled back
Source: CNBC
Last week saw a big swing in mortgage interest rates, and that took a toll on demand. Total mortgage application volume fell 1.9 percent compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, increased to 6.31 percent from 6.30 percent, for loans with a 20 percent down payment. That was the weekly average, but rates actually fell to the lowest level in over a year last Tuesday and then shot up sharply Wednesday afternoon, following the announcement on interest rates from the Federal Reserve and comments from Chairman Jerome Powell. As a result, applications to refinance a home loan, which are most sensitive to daily moves in interest rates, fell 3 percent for the week, though they were still 151 percent higher than the same week one year ago. Applications for a mortgage to purchase a home fell 1 percent for the week and were 26 percent higher than the same week one year ago.
More Californians Able to Purchase a Home in Q3
Cooling market competition and an increase in available housing helped moderate home prices and allowed more Californians to buy homes in the third quarter of 2025, C.A.R. reported last week.
Seventeen percent of California households could afford to purchase the $887,380 median-priced home in the third quarter of 2025, up from 15 percent in second-quarter 2025 and up from 16 percent in third-quarter 2024.
A minimum annual income of $223,600 was needed to make monthly payments of $5,590, including principal, interest, taxes and insurance on a 30-year fixed-rate mortgage at a 6.67 percent interest rate.
Twenty-seven percent of home buyers were able to purchase the $649,990 median-priced condo or townhome. A minimum annual income of $163,600 was required to make a monthly payment of $4,090.
Zillow Facing New Class-Action Lawsuit Over Alleged Broker Kickbacks
Zillow is the defendant in a new class-action lawsuit filed in Washington District Court on November 7, 2025. The suit alleges that Zillow engaged in broker kickbacks by linking access to client leads with the use of the company’s financing arm, Zillow Home Loans.
The complaint focuses on Zillow’s Premier Agent program and its relationship with Zillow Home Loans. It alleges that Zillow violated the Real Estate Settlement Procedures Act (RESPA), the Washington Consumer Protection Act, and facilitated the breach of fiduciary duty by real estate agents.
The primary target of the lawsuit is Zillow’s Premier Agent program and its connection to Zillow Home Loans. Participating agents who pay or earn access to consumer leads through Premier Agent around 2022 also began to be assessed by Zillow by metrics related to its home loans program, the lawsuit alleges, “requiring Participating Agents to meet specific Zillow Home Loans pre-approval quotas as a condition for maintaining access to these high-value leads.”
“Agents who meet Zillow Home Loan’s pre-approval quotas receive better leads and placement, while those who fail to do so face reduced volume or removal from the program — a textbook quid pro quo that turns Zillow’s referral network into a mortgage funnel in which Zillow controls the flow of valuable buyer leads,” the complaint continues.
Market Update
The U.S. economy continues to navigate through uncertainty as the government shutdown lingers on. Despite elevated inflation, slowing job growth, and ongoing government challenges, consumer spending is expected to remain resilient. Holiday sales, in fact, are projected to surpass $1 trillion for the first time this year. However, underlying risks are surfacing with job cuts reaching levels last seen since 2003 and consumer credit risk becoming increasingly polarized. These dynamics are shaping the broader economic landscape, influencing everything from retail activity to housing affordability and development sentiment.
October 2025
What the Government Shutdown Means for Rental Housing Providers
It has been nearly one week since the federal government began, and many rental housing providers are asking what this means for federally funded housing programs and for tenants who may be affected. While the situation is dynamic, here is the key information rental housing providers need to know for the time being.
For now, Section 8 payment will continue. The U.S. Department of Housing and Urban Development has already obligated funding that allows public housing authorities to continue operating their tenant-based voucher programs through October, and likely into mid-November. This funding covers the government’s share of the rent for Section 8 voucher recipients.
Several large California housing agencies have confirmed that the shutdown is not disrupting their immediate operations and that voucher payments are continuing as scheduled.
The California Apartment Association issued a Q&A about rental housing and federally funded housing programs, and C.A.R. created an FAQ about the federal government shutdown and its impact on REALTORS® and their clients.
FinCEN Postpones Residential Real Estate Reporting Date
In mid-September, in response to a Financial Crimes Enforcement Network (FinCEN) rule requiring collection and reporting of data on certain “all cash” transactions, C.A.R. released a new form titled “Federal Reporting Requirement Purchase Addendum” (C.A.R. form FRR-PA). The FRR-PA was bundled with the Residential Purchase Agreement (C.A.R. form RPA) and other applicable agreements so that escrow and title companies would have contractual authority to gather and report information for escrows that were scheduled to, or might, close on or after the rule’s scheduled effective date, December 1, 2025. Implementation of the rule is now delayed until March 1, 2026.
C.A.R. had intended to update the RPA to include the necessary contractual instructions with the December 2025 forms release and then discontinue the FRR-PA at that time. Those plans have changed. The FRR-PA has been updated to reflect the new implementation date, and a revised FRR-PA, with a revision date of 10/25, will be available on zipForm. A change to the RPA addressing the FinCEN rule will not be made in December. Instead, the FRR-PA will continue in place until the next C.A.R. forms release in June.
Market Update
Washington remained gridlocked over funding, as the government shutdown that began on October 1. While the standoff between the two political parties has disrupted key data releases, including the monthly Jobs Report from the Bureau of Labor Statistics (BLS), private-sector indicators continue to reveal stress points in the labor market. Investors and policymakers are watching whether the labor market will soften before growth can meaningfully accelerate again. Meanwhile, the economy continues to show its resilience amid an uncertain future. The U.S. consumers’ confidence, however, seems to be waning somewhat, as latest survey results suggest a decline in confidence last month.
Insurance Companies Ordered to Preserve Residential Insurance for Homes Across Six Counties
Insurance Commissioner Ricardo Lara has ordered insurance companies to preserve residential property insurance coverage for approximately 124,000 homes affected by wildfires in Calaveras, Tuolumne, San Joaquin, Stanislaus, Mariposa, and Merced counties after Governor Gavin Newsom issued an emergency declaration on September 19. The Commissioner’s Bulletin shields those living within the perimeters or adjoining ZIP Codes of the TCU September Complex Fire from insurance non-renewal or cancellation for one year from the date of the Governor’s emergency declaration regardless of whether they suffered a loss.
Falling Credit Scores Pose Challenge for U.S. Housing Market
Average credit scores in the U.S. have dropped to 715 in 2025 from 718 in 2023, according to FICO. This downward trend signals increasing financial challenges for many Americans, with broad implications for borrowing capacity. Gen Z is particularly affected, with 14% experiencing credit score drops of more than 50 points in the past year, largely due to resumed federal student loan collections.
New California law aims to stabilize the FAIR Plan
Source: Associated Press
Gov. Gavin Newsom signed a bipartisan bill Thursday that aims to prevent the state’s home insurer of last resort from running out of money following a natural disaster. The FAIR Plan is an insurance pool that provides policies to people who can’t get private insurance because their properties are deemed too risky to insure.
With high premiums and basic coverage, the plan is designed as a temporary option until homeowners can find permanent coverage. But more Californians are relying on it than ever as increasingly devastating and destructive fires spark across the state, including in densely populated areas. There were nearly 600,000 home policies on the FAIR Plan as of June. After wildfires swept through Los Angeles earlier this year and destroyed more than 17,000 structures the plan faced a loss of roughly $4 billion and needed a $1 billion bailout from private insurers to pay out claims. Half of that cost is expected to be passed onto all policyholders. The new law allows the FAIR Plan to request state-backed loans and bonds and spread out claims payments over multiple years after a disaster. Previously, insurance companies were required to pay the full bailout within 30 days.
Will mortgage rates go down to 5%?
Source: Yahoo! Finance
With 30-year fixed home loan rates remaining over 6 percent for three years now, 5 percent home loan rates are a faint memory. Most housing experts do not expect mortgage rates to decline significantly further through the end of this year, and any decreases in 2026 are expected to be gradual and minimal. However, a major economic setback could change that.
According to Realtor.com chief economist Danielle Hale, the most likely trigger for lower mortgage rates would be gradually reducing inflation to 2 percent over time, which would normalize longer-term interest rates and could potentially bring mortgage rates into the 5.5 to 6 percent range. However, Federal Reserve rate cuts and lower mortgage rates are not a one-for-one proposition. Hale said that from last September through January, the Fed cut its benchmark rate by a percentage point, and mortgage rates rose by almost the same amount. What could trigger a quicker cut on mortgage rates would be a recession. Of course, a recession could bring additional complications into the affordability equation: job and income insecurity among the most likely.
CA FAIR Plan seeks insurance premium hike of nearly 36%
Source: Mercury News
The FAIR Plan, California’s last-resort insurance program for homeowners needing fire coverage, is seeking approval for steep rate hikes averaging 35.8 percent, though some policyholders could actually see their premiums drop. If approved by the state insurance department, the changes could go into effect as soon as April 1, 2026. Under the proposal, sent to state regulators Sept. 29, insurance costs would increase for about four in five of the plan’s more than 550,000 homeowner policies across the state. The large majority of rate hikes would range from 5 percent to 60 percent. The remaining roughly 97,000 policyholders would see a rate cut, with most deductions at no more than 50 percent.
The FAIR Plan is a state-created, privately run high-risk insurance pool required to offer coverage to property owners who’ve been dropped by their providers or are unable to find coverage elsewhere. Coverage offered by the plan often costs two or three times as much as traditional policies and only offer basic fire protection, meaning homeowners generally need to purchase additional insurance. In a statement, the FAIR Plan said the overall rate increase is necessary to offset the increasing risk of climate-driven wildfires. As traditional insurers have ended coverage for hundreds of thousands of homeowners in recent years amid worsening wildfire seasons, the number of residential FAIR Plan policies has more than doubled to 590,642 as of June.
All-cash buyers dominate the national housing market
Source: Investopedia
All-cash transactions made up nearly a third of home sales in the first half of 2025, a Realtor.com report found. While down slightly from last year, all-cash purchases are still well above pre-pandemic levels that made up 28.6 percent of transactions. The trend presents another challenge for buyers in an increasingly unaffordable housing market, especially for first-time homebuyers.
Cash purchases have created a U-shaped pattern in home buying, the report showed. Two-thirds of homes priced under $100,000 are purchased with cash, while four-in-ten sales over $1 million were all cash. More than half of homes priced over $2 million were bought with cash. Older homeowners and buyers with significant equity commonly pay in cash, the report found. And while high-wealth buyers also make up a significant portion of cash purchases, they are less influenced by borrowing costs.
What the shutdown means for renters
Source: California Apartment Association
With the federal government now in a shutdown, many tenants and rental housing providers are asking what this means for federally funded housing programs and those who use them. The U.S. Department of Housing and Urban Development (HUD) has enough funding to continue their tenant-based voucher programs through October and likely into mid-November. This covers the government’s share of rent for Section 8 voucher recipients.
The California housing agencies, including the Sacramento Housing and Redevelopment Agency, Housing Authority of the City of Los Angeles, Fresno Housing Authority, Santa Clara County Housing Authority and San Diego Housing Commission, have confirmed that the shutdown is not disrupting their immediate operations and that voucher payments are continuing as scheduled. If a prolonged shutdown leads to delays in federal payments, landlord cannot evict tenants over delayed payment of the portion of rent owed by the government. Nor can they require tenants to pay the government’s share.
Borrowers return to riskier loans, looking for savings
Source: CNBC
Mortgage demand overall weakened again last week, even as interest rates fell slightly. For those still in the market, though, they are looking increasingly to adjustable-rate loans to get the lowest interest rate possible. Total mortgage application volume dropped 4.7 percent last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.43 percent from 6.46 percent, with points falling to 0.60 from 0.61, including the origination fee, for loans with a 20 percent down payment. Applications to refinance a home loan, which rose sharply in mid-September and then dropped back again two weeks ago, fell further last week, down 8 percent for the week. Refinance demand is still 18 percent higher than it was the same week one year ago. Applications for a mortgage to purchase a home declined 1 percent for the week and were 14 percent higher than the week one year ago. Purchase demand hasn’t moved much in the past few months as potential homebuyers contend with high prices and growing uncertainty in the economy. For those who are buying or refinancing, somewhat riskier adjustable-rate mortgages are gaining in popularity, as they offer lower interest rates. Rate terms on ARMs can be fixed for up to 10 years, but the loans are considered riskier as they can adjust higher, depending on market conditions when the fixed term expires. The ARM share increased to 9.5 percent last week from 8.4 percent the prior week.
California home sales rebound after 5-month slump
Source: Patch
Home sales rebounded last month across California, increasing on both a month-to-month and year-to-year basis, the CALIFORNIA ASSOCIATION OF REALTORS® announced Wednesday. Sales in September increased 5 percent from the previous month and rose 6.6 percent year-over-year. That year-over-year increase came after five months of year-over-year declines.
The statewide median home price last month was $883,640, down 1.7 percent from August, and up 1.8 percent compared to September 2024. The highest median price in California in September was San Mateo County’s $2.15 million, while the lowest was Trinity County’s $210,000. Three regions recorded year-over-year, double digit sales increases: the Central Coast (11.8 percent), Southern California (11.3 percent) and the Central Valley (10.2 percent). The San Francisco Bay Area saw sales increase 9.8 percent.
U.S. homebuilder sentiment hits 6-month high
Source: Reuters
U.S. homebuilder sentiment jumped to a six-month high in October amid hopes that declining mortgage rates would stimulate demand for housing and help reduce an inventory overhand that has hampered new housing construction. Economic uncertainty and a lackluster labor market are, however, likely to offset some of the anticipated boost to demand from lower borrowing costs.
The Federal Reserve’s Beige Book report on Wednesday described economic activity as little changed in recent weeks and said demand for labor was generally muted. The National Association of Home Builders/Wells Fargo Housing Market index increased five points to 37 this month, the highest reading since April. However, higher goods prices from tariffs on imports as well as a stagnant labor market are hampering spending by lower- and middle-income households.
How location affects home value
Source: Homes.com
There’s more to a listing than a home’s condition. A solid neighborhood with features such as a low crime rate and highly rated schools can boost sales price, several real estate professionals told Homes.com. “A property’s community impacts its listing price heavily,” said Adam Hamilton, CEO of REI Hub, a real estate software firm in Richmond, Virginia. “It’s also something that prospective buyers need to take seriously. Everything from schools to noise levels, to crime rates, to the busyness of nearby streets all impact how ‘good’ a home is.”
More than half of homebuyers with children under the age of 18 said the quality of a school district is an important factor when buying a home, according to the NATIONAL ASSOCIATION OF REALTORS®. Also, while real estate agents aren’t allowed to offer an opinion on a neighborhood’s crime rate, agents can direct clients to resources such as local police departments. Walkability is also important: a 2023 NAR survey found that 78 percent of respondents said they would pay more for a home that was close to neighborhood amenities such as restaurants and places to shop.
Fed’s Beige Book report finds a stalled job market
Source: Investopedia
The U.S. economy is still stuck in its low hiring, low firing rut, according to the Federal Reserve’s anecdotal Beige Book report. While there is no hard data attached to Wednesday’s report, which covered September and early October, the Beige Book painted a picture of employers across the country avoiding mass layoffs and also steering clear of hiring many new workers. The report is always based on anecdotes from business and community leaders.
Reports from across the U.S. indicate sluggish economic conditions in much of the country, with only three of the Federal Reserve’s 12 district banks reporting expanding activity in their regions. The remaining nine districts reported either flat or contracting economic activity. The Beige Book normally takes a back seat to the Bureau of Labor Statistics’ monthly report on job creation, which is based on massive surveys of businesses and households. But with the government and the BLS mostly shut down since Oct. 1, the Beige Book is one of the Fed’s few reliable sources of information about how the economy is doing.
Fed: slowdown in U.S. hiring suggests economy needs rate cuts
Source: AP
A sharp slowdown in hiring poses a growing risk to the U.S. economy, Federal Reserve Chair Jerome Powell said Tuesday, a sign that the Fed will likely cut its key interest rate twice more this year.
Powell said in a speech in Philadelphia that despite the federal government shutdown cutting off economic data, the outlook for employment and inflation does not appear to have changed much since the September meeting. Fed officials at that meeting forecast that the central bank would reduce its rate twice more this year and once in 2026. Lower rates from the Fed could reduce borrowing costs for mortgages, car loans, and business loans.
Average 30-year mortgage rate slips to 6.27%
Source: AP
The average rate on a 30-year U.S. mortgage declined again this week, easing to just above its lowest level this year. The average rate slipped to 6.17 percent from 6.3 percent last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.44 percent. The latest dip brings the average rate to just above 6.26 percent, where it was four weeks ago after a string of declines brought down home loan borrowing costs to their lowest level since early October 2024.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also eased this week. The average rate dropped to 5.52 percent from 5.53 percent last week. A year ago, it was 5.63 percent, Freddie Mac said. Mortgage rates started declining in July in the lead-up to the Federal Reserve’s decision last month to cut its main interest rate for the first time in a year amid growing concern over the U.S. job market. Even if the Fed opts to cut its rate further that doesn’t necessarily mean mortgage rates will keep declining. Last fall, after the Fed cut its rate for the first time in more than four years, mortgage rates marched higher, eventually reaching just above 7 percent in January this year.
California home sales rebound in August as lower rates lift demand
Source: Morningstar
A modest improvement in mortgage rates and stabilizing home prices boosted California home sales in August, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) announced.
August home sales activity edged up 0.9 percent from the 261,820 homes sold in July and slipped 0.2 percent from a year ago, when 264,640 homes were sold on an annualized basis. August’s sales remained slightly below last year’s revised levels and marked the fifth consecutive month of year-over-year sales declines. Statewide pending sales in August rose 8.3 percent from July as mortgage rates fell to a 10-month low. The statewide median home price rose to $899,140 in August, rebounding after three months of year-over-year declines.
Mortgage rates finally dipping, but home shortage remains
Source: Marketplace
Even with mortgage rates coming down, creating a flurry of refinancing activity, home sellers are pulling back. August saw a 1.4 percent drop in active listings — while new listings dropped 1.1 percent, according to new data from Redfin.
Earlier this year, home buyers in many parts of the country were finally starting to feel the market tip in their favor. Sellers who weren’t getting their preferred price started pulling back, often because they may have paid off their home or they may have had a low mortgage rate.
America’s housing market reaches inflection point
Source: Newsweek
Newly built homes are now cheaper than existing ones, according to the latest data, as developers navigate oversaturated housing markets where sellers outnumber buyers in a few markets. The median sale price of a new home in June, according to the latest data made available by the Census Bureau, was $401,800, down 4.9 percent from a month earlier and 2.9 percent from a year earlier. In the same month, the median sale price of an existing home was $435,300, according to data by the National Association of REALTORS® (NAR), up 2 percent year-over-year.
It is rare for newly built homes to cost less than older existing ones. In the first quarter of the year, new homes in the U.S. cost $14,600 more than existing ones, but recently things have switched around. New home inventory surged over a few months, especially in areas like Florida and Texas which have experienced a construction boom in the past couple of years.
Eaton fire contaminated Altadena with lead, even after cleanup
Source: Los Angeles Times
The Eaton fire left significant levels of lead in Altadena’s soil, according to a report from the Los Angeles County Department of Public Health. The U.S. Army Corps of Engineers hauled away debris and soil from destroyed properties, but that did not completely remove the contamination, the report found.
People whose homes are still standing, or are partially damaged, also face significant contamination. That is true both within and outside the burn scar. Most experts think the lead in the soil comes from incinerated lead paint that coated most homes built before it was banned in 1978. Most of the testing found only lead, but in the Pacific Palisades, the county also noted one cadmium and thallium hot spot and arsenic, a carcinogen, in another location. “We want people to be paying attention to this in their rebuild process, so that they are reducing any potential risk there,” said Dr. Nichole Quick, chief medical adviser for the Department of Public Health. “And if they’re in a more high-risk situation, they may want to be taking additional precautions.”
CFPB funding crisis could see workers furloughed soon
Source: MPA Mag
The Consumer Financial Protection Bureau (CFPB) is reportedly considering furloughing workers amid deep funding cuts, the latest in a series of setbacks to hit the key mortgage watchdog this year. Two sources told Reuters last week that senior leaders at the bureau are weighing up the move as fears grow that it could find itself unable to meet payroll and severance costs in the next fiscal year.
While the CFPB has played a crucial role in recent years in issuing and enforcing rules that govern mortgage lenders, servicers and brokers, it has seen huge changes in 2025 as part of huge cost-cutting and savings measures implemented by the Trump administration. For the mortgage industry, efforts to roll back the CFPB could have significant implications related to regulation and oversight. But while those moves could strip back federal involvement in regulating the industry, few believe it would create a free-for-all or completely remove oversight of the mortgage space.
Mortgage demand stalls after mini refinance boom
Source: CNBC
After a massive 58 percent weekly surge in refinance demand the week before, mortgage demand stalled again last week, even though interest rates fell further. Total application volume rose 0.6 percent last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.34 percent from 6.39 percent, with points increasing to 0.57 from 0.54, including the origination fee, for loans with a 20 percent down payment. This is the lowest level since September 2024. Refinance applications climbed just 1 percent for the week but were 42 percent higher than the same week one year ago. Applications for a mortgage to purchase a home were essentially flat, up just 0.3 percent for the week and up 18 percent from the same week one year ago.
Gov. Newsom Signs Law to Provide Fire Survivors with Stronger Mortgage Relief
As part of the state’s continued efforts to support Los Angeles firestorm survivors, Governor Newsom signed into law Assembly Bill 238 (Harabedian and Irwin), which requires lenders to help borrowers experiencing financial hardship due to the Los Angeles firestorms by offering mortgage forbearance for up to 12 months.
This legislation expands on the January agreement the state reached with mortgage lenders to offer forbearance for firestorm survivors for at least 90 days, with many lenders voluntarily offering forbearance for up to 12 months. This bill deepens homeowner protections by expanding relief and creating enforceable legal requirements.
California Home Sales Rebound in August as Lower Rates Lift Demand
A modest improvement in mortgage rates and stabilizing home prices boosted California home sales in August, C.A.R. said last week.
August home sales activity edged up 0.9 percent from the 261,820 homes sold in July and slipped 0.2 percent from a year ago, when 264,640 homes were sold on an annualized basis. August’s sales level remained slightly below last year’s revised level and marked the fifth consecutive month of year-over-year sales declines. It was also the 35th straight month in which the seasonally adjusted sales rate remained below the 300,000 benchmark.
The statewide median home price rose to $899,140 in August, rebounding after three straight months of year-over-year declines. The price increased 1.7 percent from July — recovering much of the previous month’s drop — and was 1.2 percent higher than the same time last year. This monthly gain also surpassed the long-term July-to-August average of 1.2 percent. With prices showing stability in August and mortgage rates falling to their lowest level in a year, the housing market may see improved support in the months ahead.
Market Update
Despite ongoing challenges in the labor and housing markets, recent data offers reasons for guarded optimism. New home sales have surged to multi-year highs, buoyed by lower mortgage rates and builder incentives, while inflation remains contained enough to reassure policymakers. Although jobless claims have dropped and builder sales expectations are improving, persistent concerns about unemployment and construction costs suggest that the recovery, while promising, still faces headwinds. Overall, the outlook is brighter, but caution remains warranted as uncertainties linger.
What a government shutdown means for homebuyers and sellers
Source: C.A.R.
With Congress unable to reach a funding deal, as of October 1, the federal government has shut down. During a government shutdown, many real estate programs are impacted. Federal agencies are required to implement contingency plans that allow “essential” activities to continue, even if on a limited basis. The most critical housing and mortgage programs – HUD/FHA, VA and the conforming mortgage guarantors (Fannie Mae and Freddie Mac) – are structured to maintain core functions throughout a shutdown.
For FHA single-family loans, HUD’s plan permits the endorsement of new loans with a few exceptions. However, activities requiring staff discretion or third-party approvals are likely to pause or move more slowly. For VA home loans, guarantees remain available and lenders can continue processing applications, but reduced staffing may cause delays in appraisals, certificates of eligibility, and underwriting support. While conforming (GSE-backed) mortgages are generally unaffected since Fannie Mae and Freddie Mac are not subject to annual appropriations, some services that depend on other federal agencies may be disrupted or slowed, such as IRS tax transcripts being provided to lenders and employment verification for federal workers. Also, a lapse in the National Flood Insurance Program (NFIP) authority could prevent the sale of new or renewal policies.
Mortgage lock-in effect eases
Source: Scotsman Guide
Mortgage rates began 2025 around 7 percent and have declined to a range of 6.25 percent to 6.5 percent over the past several weeks. The rate movement has spurred mortgage activity, particularly among refinance applicants carrying plus-7 percent mortgages of post-pandemic vintages.
From the first quarter of 2023 to the first quarter of 2025, the share of active mortgages with rates above 6 percent doubled from 9.5 percent to 18.9 percent, according to a Redfin analysis of the Federal Housing Finance Agency’s National Mortgage Database. That climbed to 19.7 percent in the second quarter of 2025 – the highest share since 2015 – a reflection of easing mortgage rate lock-in effects. More homeowners are deciding it’s worth moving even if it means giving up a lower mortgage rate.
Typical U.S. luxury home prices rise to $1.25M as sales fall
Source: Redfin
Luxury home sale prices rose to 3.9 percent year over year to a median $1.25 million, a record high for the month of August, but down from the all-time high of $1.35 million in March, a month when prices are typically higher. According to Redfin’s analysis, luxury home prices grew nearly three times faster than non-luxury home prices, which increased 1.4 percent to a median $370,000 across the nation.
Luxury home sales fell 0.7 percent year over year to the lowest August level since at least 2013. It was a virtually identical story for sales of non-luxury homes, which dropped 0.6 percent – also to the lowest August level on record. The number of non-luxury homes for sale grew faster (13.4 percent) to reach the highest August level since 2019.
FICO to directly sell credit scores to mortgage resellers
Source: Yahoo! Finance
Fair Isaac Corp. (FICO), the company that creates the FICO credit score, will now sell credit scores directly to mortgage resellers, a move that sent shares of third-party credit bureaus plunging.
Through a new program, mortgage resellers will be able to calculate and distribute credit scores directly to customers, reducing their reliance on credit bureaus. This will bring more price transparency and savings for mortgage lenders, mortgage brokers and other industry participants, FICO said in a statement. Subsequently, shares of credit-reporting bureaus TransUnion and Equifax Inc. each fell more than 8 percent on Thursday. FICO shares were up 18 percent at the close after posting a 32 percent surge. Credit scores are a key tenet of American consumer financing, used by lenders to judge how well individuals can pay back their obligations. The three major providers of consumer credit reports in the U.S. – Equifax, TransUnion and Experian Plc – help consumers apply for mortgages or car loans.
U.S. economy lost 32,000 private-sector jobs in September
Source: CNN
Private payrolls plunged in September, complicating the picture for the U.S. economy as policymakers and investors struggle to assess the state of the labor market amid a government shutdown. The Bureau of Labor Statistics is unlikely to release the monthly jobs report this Friday due to the closure. That means many flying blind without critical economic data are having to key into any information they can get, including Wednesday’s private sector job data from payroll company ADP.
U.S. private sector businesses lost 32,000 jobs in September, according to the report. August’s previously estimated 54,000 payroll gains were downwardly revised to negative 3,000. Small private-sector businesses drove last month’s decline, and losses were widespread across industries (with some of the largest losses in professional and business services and leisure and hospitality), ADP reported. The bulk of the hiring occurred at health care businesses, which have been the sale source of consistent employment growth this year.
Mortgage refi demand plunges 21% as rates hit 3-week high
Source: CNBC
A brief roller-coaster ride for mortgage rates caused yet another swing in demand. After dropping to a three-year low two weeks ago, rates then shot right back up again. As a result, total mortgage application volume declined 12.7 percent last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The drop was mostly driven by a pullback in refinancing.
Applications to refinance a home loan fell 21 percent for the week and were 16 percent higher than the same week one year ago. This, even though mortgage rates were 32 basis points higher last week than the year before. The refinance share of mortgage activity decreased to 55 percent of total applications from 60 percent the prior week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) increased to 6.46 percent from 6.34 percent, with points rising to 0.61 from 0.57, including the origination fee, for loans with a 20 percent down payment. Applications for a mortgage to purchase a home declined 1 percent for the week and were 16 percent higher than the week one year ago. This is after three consecutive weeks of gains.
September 2025
Mortgage demand jumps to highest level in 3 years, as interest rates drop sharply
Source: CNBC
A sharp drop in mortgage interest rates finally got some homebuyers off the fence. It also helped more current homeowners save on their monthly payments. Total mortgage application volume jumped 9.2 percent from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (of $806,500 or less) decreased to 6.49 percent from 6.64 percent, with points falling to 0.56 from 0.59, including the origination fee, for loans with a 20 percent down payment. Rates fell even further on Thursday, to 6.27 for the 30-year fixed. Applications to refinance a home loan jumped 12 percent for the week and were 34 percent higher than the same week one year ago. The refinance share of mortgage activity increased to 48.8 percent of total applications from 46.9 percent the previous week. Applications for a mortgage to purchase a home rose 7 percent for the week and were 23 percent higher than the same week one year ago. The 30-year fixed is still 20 basis points higher than it was a year ago, but it is considerably lower than where it was at the start of last year. The average loan size for refinances also increased significantly, because the larger the loan, the bigger the potential monthly savings.
Homebuyer shortage forces sellers to lower price or walk away
Source: AP
Skyrocketing housing values and a shortage of homes on the market gave homeowners the upper hand for years when it came time to sell. That’s no longer a given. Across the county, it’s getting tougher for sellers to drive a hard bargain. A dearth of home shoppers who can afford to buy and uncertainty about the outlook for the economy, jobs and mortgage rates is putting pressure on sellers to give ground at the negotiating table.
In some markets, mainly in the South and West, homeowners who are eager to sell are more likely to give buyers a better deal. This could include a lower price, upfront money to nudge down the buyer’s mortgage rate, and funds for closing costs and any repairs or improvements that may pop up after the home inspection.
Black homeownership rates drop as economist issues DEI warning
Source: Newsweek
The number of Black households owning their own homes has plunged across the nation, according to new data from Redfin, in a drop that some economists think may be linked to the Trump administration’s crackdown against diversity, equity and inclusion (DEI) policies. The Black homeownership rate fell to 43.9 percent in the second quarter of the year, the new report found – its lowest level since the fourth quarter of 2021. It was down from the 45.3 percent recorded a year earlier, showing that the recent slowing of the U.S. housing market has not helped Black households get onto the property ladder.
Homeownership rates fell among non-Hispanic white households (to 74 percent from 74.4 percent) and Asian/Native Hawaiian/Pacific Islander households (to 62.1 percent from 62.8 percent). By comparison, Hispanic homeownership rose slightly to 48.8 percent from 48.5 percent during the same time frame.
New law protects homebuyers
Source: Realtor.com
A new law, the Homebuyers Privacy Protection Act, effective March 5, 2026, will prohibit the abuse of what’s known as trigger leads – when credit bureaus sell a borrower’s information immediately after a mortgage credit inquiry. The law makes it illegal for credit bureaus to do so without consumer’s consent.
Industry leaders say this is a major win for both borrowers and mortgage professionals. Essentially, borrowers will be protected from the flood of unwanted calls, texts and emails a consumer may receive after applying for a mortgage.
U.S. economy is worse than thought with 1.2 million fewer jobs
Source: CNBC
U.S. employers added far fewer jobs in 2024 and early 2025 than previously thought, indicating the labor market may have been significantly weaker than initial estimates had suggested. The U.S. economy added 911,000 fewer jobs over the 12 months ending in March than previously estimated, the U.S. Bureau of Labor Statistics (BLS) said on Tuesday. The figure, which exceeded economists’ expectations, appears to be the largest revision ever recorded.
The BLS releases an initial estimate of its jobs report based on an initial tranche of data, but the agency often revises the figure in subsequent months as households and businesses return additional data. After a slow-moving process of compiling state unemployment data, the agency releases an additional revision teasing out accurate findings. The preliminary estimate will be finalized next year.
Wildfire warnings accompany California’s older homes
Source: HousingWire
California has become the first U.S. state to require homeowners selling older properties in high-risk wildfire zones to disclose not just a house’s vulnerabilities, but also steps taken to reduce those risks. The new mandate took effect in July and applies to houses built before 2010 – when the state strengthened building codes to withstand wildfires, Bloomberg reported.
Sellers must identify wildfire hazards such as wood-shingle roofs, uncovered vents, single-pane windows and nearby vegetation. They must also indicate whether they’ve taken action to mitigate those threats. Nearly 91 percent of California homes were built before 2010 – including 2 million in wildfire-prone areas. California will go further in 2029 when it begins enforcing rules requiring property owners in high-risk zones to remove vegetation and combustible materials within five feet of structures.
California housing market expected to see modest rebound in 2026
Source: MPA Mag
California’s housing market is set for a modest recovery in 2026, according to the CALIFORNIA ASSOCIATION OF REALTORS (C.A.R.), which forecast a 2 percent rise in single-family home sales and a 3.6 percent increase in the median home price. While affordability will still be tough, C.A.R. said better lending conditions and more available homes could help more buyers enter the market.
C.A.R. expects 274,400 single-family homes to be sold in 2026, up from 269,000 in 2025. The median price was forecast to reach a record $905,000, after rising to $873,900 in 2025. Although these increases are smaller than the big jumps seen earlier in the decade, they point to a more stable market.
Mortgage refi demand spikes 58% as interest rates drop sharply
Source: CNBC
Mortgage rates last week dropped to the lowest level since October of last year in anticipation of the Federal Reserve’s quarter point cut in the federal funds rate (that was confirmed on Wednesday). That caused a massive run on refinances, as consumers seek more savings in an uncertain economy. Applications to refinance a home loan jumped 58 percent last week and were 70 percent higher than the same week one year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. The refinance share of mortgage activity increased to 59.8 percent of total applications from 48.8 percent the prior week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (of $806,500 or less) decreased to 6.39 percent from 6.49 percent, with points falling to 0.54 from 0.56, including the origination fee, for loans with a 20 percent down payment. Refinance applications were particularly strong for adjustable-rate mortgages, rising to 12.9 percent of total applications – its highest level since 2008. Applications for a mortgage to purchase a home rose 3 percent for the week and were 20 percent higher than the same week one year ago.
More consumers using rent payments to boost credit score
Source: CNBC
More renters are reporting their rent payment activity to credit bureaus to improve their credit, a new report finds. The share of renters whose rent payments are reported to credit bureaus rose to 13 percent in 2025, up from 11 percent in 2024, according to a new survey by TransUnion, one of the three major credit bureaus. TransUnion surveyed 2,006 renters in early March.
Sharing rent payment activity has been shown to be beneficial for participants, especially those who are “credit invisible” or do not have any credit history, experts say. Those who have enrolled typically see their credit scores increase. When rent payments are included in credit reports, consumers see an average growth of 60 points to their credit score, according to a 2021 TransUnion report. Rent reporting services can also help younger adults as they are more likely to have short credit histories and to rent.
Against the odds, Americans are still spending
Source: CNN
Americans still opened their wallets last month, despite persistent fears about the economy, a lowing labor market and higher tariffs. Spending at U.S. retailers rose 0.6 percent in August, the Commerce Department said Tuesday, unchanged from July’s upwardly revised 0.6 percent.
Last month’s figure came in much better than economists’ expectations of a 0.2 percent increase, according to a poll by data firm FactSet. Retail sales are adjusted for seasonal swings but not inflation. Even though employers have fit the brakes on hiring in recent months, U.S. consumers haven’t cut back their spending meaningfully – and they may continue to spend as long as layoffs don’t surge.
U.S. homebuilder sentiment dips to lowest level since 2022
Source: Reuters
A gauge of U.S. homebuilder sentiment fell unexpectedly in August, slipping back to its lowest level in more than two-and-a-half years, with more than a third of residential construction firms cutting prices and roughly two-thirds of them offering some form of incentive to lure buyers sidelined by still-high mortgage rates and economic uncertainty.
The National Association of Home Builders/Wells Fargo Housing Market Index fell to 32, matching the lowest reading since December 2022, from 33 in July, the Association said on Monday. Economists polled by Reuters had expected the sentiment score to improve to 34. Buyer foot traffic, though, edged up to its highest level since May, though it remains at a low level. On a regional basis, sentiment among builders improved modestly in the West.
Credit scores fall for 2nd year in a row as more borrowers miss payments
Source: CNBC
The national average credit score – which had been steadily increasing for over a decade – fell for the second year in a row, according to a new report from FICO, develop of one of the scores most widely used by lenders. The average score is now 715, down from 717 in 2024 and 718 in 2023. FICO scores range between 300 and 850.
High interest rates and higher prices have been a drag on many Americans’ financial standing. Consumers, overall, are falling deeper into debt, causing an increase in credit card balances and an increase in missed payments, FICO found. That contributed to the average score decline. The resumption of federal student loan delinquency reporting on consumers’ credit was another significant contributing factor to declining scores, according to FICO.
Market Update
California’s housing market is poised for gradual improvement, with statewide sales of existing single-family homes projected to remain steady in 2025 and inch up by 2% in 2026, supported by moderating mortgage rates and improving affordability. The Federal Reserve’s recent decision to cut the federal funds rate for the first time in 2025 will also help the market by offering further relief to buyers and the broader economy. While builders remain cautious and labor market uncertainties persist, resilient consumer spending and early signs of a rebound in home sales suggest that, despite ongoing challenges, the outlook for the coming months is brighter than recent trends alone might indicate.
July 2025
Homeowner’s insurance premiums vary widely from state to state, but they are all going up
Source: CNBC
Six months after wind-whipped wildfires killed 30 people and destroyed thousands of homes and businesses in and around Los Angeles, the scenes in Altadena and Pacific Palisades are still horrific, with block after block of burned out homes and businesses. But every so often, there are small signs of rebirth, from a property owner cleaning up their lot, or workers repairing a home that was merely damaged.
“The situation in insurance has actually been remarkably stable, considering everything that happened,” said Scott Wilk, an independent insurance agent and owner of the Santa Clarita, California, branch of TWFG Insurance. That is not to say that premiums are not surging after the wildfires. The online marketplace Insurify projects California premiums will rise 21% this year, even in areas that are far from Los Angeles, in what experts had predicted would be a year of only modest increases in the state. In fact, Insurify is projecting premium increases in all 50 states this year, averaging around 8%. California’s increase is not even the largest. That distinction belongs to Louisiana, where premiums are projected to rise 28%. Nor is the phenomenon limited to coastal states. Iowa and Minnesota are also looking at double-digit increases.
Delistings Surge Nearly 50% as Sellers Who Can’t Get Their Price Quit the Market in Frustration
Source: Realtor.com
After failing to find a buyer at the price they think they deserve, more home sellers are pulling their listings off the market altogether. Delistings jumped 47% nationally in May from a year earlier, in a sign that sellers would increasingly rather wait than negotiate, according to the Realtor.com economic research team’s latest monthly housing trends report. Year to date, delistings are up 35% from the same period in 2024.
The increase is partly due to the overall expansion in active inventory, which was up 29% in June from a year earlier. Newly listed homes increased 6.2% from a year ago, but remained flat over the past two months. Still, delistings are outpacing new listings, with 13 homes delisted in May for every 100 homes hitting the market—up from 10 in the spring of 2024 and 2023, and just six in 2022. The increase in delistings follows a surge in price reductions, as some sellers with unrealistic price expectations faced a softer market with limited buyers. Now, it seems that some sellers would rather wait out the market than accept a lower price for their home.
Priced out of LA homeownership? City Council proposal could allow sale of cheaper ADUs
Source: LAIST.com
Los Angeles City Council members introduced a batch of proposals this week aimed at speeding up the creation of more housing, including new options for achieving what for most Angelenos is an increasingly impossible dream: buying a home. Among the five proposals put forward Tuesday, two focus on accessory dwelling units — or ADUs. Many homeowners have been building these structures in their backyards to create homes for relatives or to rent out for extra income.
One proposal seeks to allow homeowners to put ADUs up for sale, separately from their main home, potentially creating a cheaper pathway to homeownership for the vast majority of Angelenos who cannot afford to buy larger single-family homes. In an interview with LAist, Councilmember Nithya Raman, who is chair of the Housing and Homelessness Committee, said these smaller homes could be ideal for L.A.’s shrinking average household size.
Paying Rent on Time Could Now Help You Get a Mortgage After Key Change at Fannie and Freddie
Source: Yahoo Life
A new policy change at mortgage giants Fannie Mae and Freddie Mac could help first-time homebuyers qualify for a mortgage if they have a track record of paying their rent on time. Effective immediately, Fannie and Freddie will allow mortgage lenders to use VantageScore credit ratings to assess borrower creditworthiness, in addition to or instead of traditional FICO scores, Federal Housing Finance Agency Director Bill Pulte said on Tuesday. Unlike FICO, VantageScore takes rent payment history into account, if those payments are reported to either Equifax, Experian, or TransUnion, the three major credit bureaus.
“We are expanding credit access to millions of forgotten Americans—people who live in rural areas, renters who pay their rent on time every month—and bringing down closing costs,” said Pulte, who is also the chairman of Fannie and Freddie, in a social media post. FICO and VantageScore both issue a credit score between 300 and 850 to potential borrowers, with the goal of projecting the likelihood that a person will fall behind on debt payments.
More luxury homebuyers paying with cash this year, report says
Source: Fox Business
More luxury homebuyers are paying with cash to acquire properties this year, a report from Coldwell Banker Real Estate revealed. The company said in its “2025 Mid-Year Report” that more than half of over 200 surveyed Coldwell Banker luxury property specialists reported an uptick in wealthy buyers purchasing homes with cash. Roughly 34.1% said there has been a “slight increase” while 16.6% said there has been a “significant” rise in that method.
Mortgage rates have played into the increase in buyers paying cash to acquire homes, according to National Association of Realtors Chief Economist and Senior Vice President of Research Lawrence Yun. “High mortgage rates are not appealing for borrowing, and, therefore, that induces the wealthy to pay all cash for real estate (after selling off a few of their assets),” he told FOX Business. Many have been turning to personal savings, stocks or funds they netted from selling another property as the “primary” means to make their luxury home purchases, according to the Coldwell Banker Real Estate report.
Homebuyers finally responded, after mortgage rates hit lowest level in three months
Source: CNBC
A brief drop in interest rates caused a strong bump in otherwise tepid mortgage demand. Total mortgage application volume jumped 9.4% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Last week’s results included an adjustment for the July Fourth holiday.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, decreased to 6.77% from 6.79%, with points holding steady at 0.62, including the origination fee, for loans with a 20% down payment. That was the lowest level in three months. Applications to refinance a home loan rose 9% for the week and were 56% higher than the same week one year ago. Refinance demand has been particularly weak because mortgage rates were stuck at high levels for so long. Applications for a mortgage to purchase a home also rose 9% for the week and were 25% higher than the same week one year ago.
Buy now, pay later loans will now impact Americans’ credit scores
Source: Fox Business
FICO announced that it is going to incorporate buy now, pay later data (BNPL) into credit scores as the payment method surges in popularity. FICO said the scores represent a “significant advancement in credit scoring, accounting for the growing importance” of such loans in the U.S. credit ecosystem.
Lending services such as Afterpay, Klarna, Affirm and PayPal have risen to prominence as cash-strapped consumers looked to stretch their wallets as they contend with persisting inflation, high interest rates and student loan payments, which resumed in October 2023 after a pause due to the COVID-19 pandemic. The services allow consumers to make purchases and pay for them in installments, often with no interest or fees. However, interest is tacked on to certain plans, and consumers can get hit with a late fee if they don’t have adequate funds in their account to cover the payments. Traditionally, they have been utilized for big-ticket items. However, these buy now, pay later financing options have become so popular in the current economic environment that a growing number of consumers are even leveraging them to pay for necessities like food.
U.S. home sellers sitting on record $698 billion worth of listings
Source: NBC
There is $698 billion worth of homes for sale in the United States, which is a record since Redfin began tracking data in 2012. A Redfin report shows that the total worth of homes for sale is up 20.3 percent from last year. The data is based on the list price of all active U.S. listings as of the last day of each month.
The value is at an all-time high due to three significant factors: growing inventory, slowing demand, and increasing home-sale prices. In terms of inventory the total number of homes on the market nationwide rose 16.7 percent year over year by April 2025. In terms of demand, the typical home sold in April 2025 took over 40 days to go under contract, five days longer than last April. Redfin’s report indicated that would-be buyers are backing off due to record-high monthly housing costs and widespread economic instability. In addition, home-sale prices rose 1.4 percent year-over-year by April 2025. The report indicated that there are nearly 500,000 more home sellers than buyers in the current market nationwide.
Homeowners face a stiff penalty for staying in their homes too long
Source: Realtor.com
Millions of American homeowners are sitting on a hidden tax burden they never planned for — one that threatens their hard-earned home equity and, at the same time, is tightening the nation’s already strained housing supply. Today, roughly 1 in 3 homeowners — nearly 29 million households — have built more home equity than the federal capital gains tax exclusion for single filers protects when they sell their primary home, according to a recent analysis by the National Association of REALTORS®. By 2030, that number is expected to grow to 56 percent of homeowners.
Most people don’t think of their home as a taxable investment. It’s their nest egg, future college fund, or inheritance for their kids. But an outdated federal rule, left unchanged since 1997, means the longer you stay and the more your home appreciates, the more likely the IRS will claim a cut when you finally sell. In 1997, the tax change allowed homeowners to exclude up to $250,000 in profit is single, or $500,000 if married and filing jointly, every time they sold a primary home. But in the decades since, home prices have climbed more than 260 percent, while the tax exemption has stayed exactly the same because it was not indexed for inflation. If it had kept pace, the cap would now be about $660,000 for individuals and $1.32 million for couples. About 31 percent of households in California could be affected by this capital gains tax.
Consumer confidence unexpectedly declines in June
Source: Yahoo! Finance
Consumer confidence retreated in June after increasing the previous month amid President Trump’s various tariff delays. The latest index reading from the Conference Board was 93 in June, below the 98.4 seen in May and the 99.8 economists had expected.
“Tariffs remained on top of consumers’ minds and were frequently associated with concerns about their negative impacts on the economy and prices,” Stephanie Guichard, senior economist of global indicators at the Conference Board, said in a press release. “Inflation and high prices were another important concern cited by consumers in June.”
Pets drive home buying
Source: NAR
Did you know that there are more households with pets than children? And these beloved pets are a driver of economic activity, namely home buying. About one-fifth of recent home buyers considered their pet when choosing a neighborhood, a share that increases among unmarried couples and single woman buyers.
According to the U.S. Census, in 1985, 58 percent of home buyers had children under the age of 18 in their homes. In 2024, just 27 percent of home buyers had a child under the age of 18 in their home. This is an all-time record low. While the number of children in U.S. households has declined in the last 40 years, there has been a rise in pet ownership. According to the American Pet Products Association, 71 percent of American households own a pet. This is up from 56 percent in 1988. Given the increasing share of pets in households and the growing time and resources devoted to them, it’s no surprise that many home buyers consider their pets the most important factor when making homebuying decisions. Factors such as proximity to a veterinarian and outdoor space for pets are important considerations for buyers with pets. Among all unmarried couples, 24 percent of home buyers considered their pet when deciding on a neighborhood, while 17 percent of single women considered their pets when deciding on a neighborhood compared to 12 percent of single men.
Mortgage rates and demand stuck in a holding pattern
Source: CNBC
Economic uncertainty at home or military conflicts overseas would each, alone, normally have a significant effect on the bond market. But now, even together, they have done little to move mortgage rates. ago.
Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (of $806,500 or less) increased to 6.88 percent from 6.84 percent, with points decreasing to 0.63 from 0.66, including the origination fee, for loans with a 20 percent down payment. That’s according to the Mortgage Bankers Association’s seasonally adjusted index. Applications for a mortgage to buy a home dropped 0.4 percent last week compared with the previous week, including an adjustment for the Juneteenth holiday. Purchase demand was 11 percent higher than the same week one year ago, but overall, it is historically low. Applications to refinance a home loan rose 3 percent for the week and were 29 percent higher than the same week one year ago. Volumes are so low that even small changes make for big percentage moves.
Governor Newsom Extends Emergency Short-term Housing Protections in Los Angeles
Governor Gavin Newsom today issued an executive order to continue his emergency order boosting the availability of short-term housing by making it easier for survivors of the LA area firestorm to stay in hotels and other short-term rentals for more than 30 days. The order was first issued on March 7, 2025, and is now extended to October 1, 2025.
The executive order extends the suspension of rules that could deter hotels, motels, and other short-term rentals from offering shelter to survivors for more than 30 days. The order temporarily allows survivors to remain classified as short-term occupants rather than tenants when they stay beyond 30 days, effectively suspending rules that might limit hotel and short-term rental operators’ flexibility to support extended stays. The order suspends these rules until October 1, 2025.
Fannie Mae’s Existing Home Sales Forecast Revised Lower
Existing single-family home sales are forecast at 4.14 million units for 2025, down slightly from last month’s forecast of 4.24 million units, according to the June 2025 Economic and Housing Outlook from the Fannie Mae Economic and Strategic Research Group. Revisions to the home sales forecast were driven in part by the Group’s higher expectations for mortgage rates, which are now predicted to end 2025 and 2026 at 6.5% and 6.1%, respectively.
Market Update
The U.S. economy encountered some notable developments in the past few weeks, including a decline in new home sales, shifts in consumer confidence, and changes in unemployment claims. While these trends reflect ongoing economic adjustments, they also highlight the dynamic nature of the market and the economy. Rising prices for goods and increasing property insurance costs are also part of the evolving economic landscape. So far, businesses and consumers are able to navigate these changes and adapt their strategies and expectations to the current environment. Hopefully, they will continue to demonstrate their resilience and flexibility in the second half of the year.
Buyers in the priciest housing markets need 80% down to afford monthly costs
Source: Realtor.com
For many, buying a home in some of the most desirable cities such as New York City and Los Angeles is a dream—but it could come with staggering upfront costs, putting homeownership well outside the reach of the typical family. Economists recommend that homebuyers follow the “30% rule,” which suggests that they spend no more than that amount of their pre-tax income on housing to leave enough money in the budget for other essential expenses and savings.
Experts at Realtor.com® looked at where buyers earning a median income could comfortably afford to buy a home without breaking the bank. As part of the analysis contained in the new affordability benchmark report, economists assumed the May 2025 average mortgage rate of 6.82%, a 20% down payment, and a standard tax and insurance estimate of 1.72% of the home’s price annually. Using this formula, the typical family would need to spend 44.6% of their income—well above the 30% affordability benchmark—to afford a median-priced $440,000 home, based on the May Housing Trends Report.
Newsom signs major rollback of CEQA reviews, with a big carve-out for big tech
Source: SFist.com
Gavin Newsom claims it’s the “most consequential housing reform in modern history” that he just exempted most urban housing projects from environmental review, as the new state budget has some additions that hope to weaken the notorious CEQA.
A policy topic often discussed is the 55-year-old California Environmental Quality Act abbreviated as CEQA (pronounced “SEE-kwa”). It’s an environmental law signed by Governor Ronald Reagan in 1970 when Nixon was in the White House, at a time when the Republican Party felt very differently about environmental conservation. CEQA was designed to ensure legislators conducted full reviews of all environmental impacts that might result from proposed large development projects, but the courts expanded it to allow any common folk to challenge developments. Those challenges could be about major issues like air pollution and traffic, or more frivolous issues like shadows or considering “people as pollution.” These challenges often led to red tape and lengthy, costly litigation that held up some major housing developments. But on Monday, in what Governor Gavin Newsom is calling “Holy Grail reform,” KTVU reports that Newsom has signed a budget bill that purports to be a major rollback of CEQA.
Trump administration moves to count crypto as a federal mortgage asset
Source: CNBC
In a landmark shift for the U.S. housing finance system, the Federal Housing Finance Agency has issued a directive ordering Fannie Mae and Freddie Mac to formally consider cryptocurrency as an asset in single-family mortgage loan risk assessments. The move, signed by FHFA Director William J. Pulte on Wednesday, signals a new era of crypto integration into traditional financial infrastructure — this time within the core of American home lending.
The order directs both housing finance giants to develop proposals that include digital assets — without requiring borrowers to liquidate them into U.S. dollars prior to a loan closing. Pulte said in a post on X that the move aligns with President Donald Trump’s vision “to make the United States the crypto capital of the world.”
Berkeley City Council permits denser housing construction in flats
Source: The Daily Californian
The Berkeley City Council unanimously adopted an ordinance at its special meeting last week that changes the city’s zoning code to allow for “middle housing,” such as duplexes and triplexes, to be built in previously single-family residential zones. The changes include the revamping of building standards to allow for bigger and taller structures to be constructed, loosening permit requirements for the construction and demolition of homes and merging the R-1A and R-2 low-density districts due to their similarity. An exception is made for hillside neighborhoods, which will not be subject to these changes.
A supplemental by District 1 Councilmember Rashi Kesarwani also increased the limit on the number of dwelling units per acre to 70 across all lower-density districts. Additional supplementals by District 4 Councilmember Igor Tregub and District 8 Councilmember Mark Humbert directed the building standards to consider issues such as loss of yard space and solar access and referred to the planning staff to provide annual quantitative reports regarding the status of middle housing projects, respectively.
LA County leaders vote to extend housing price-gouging protections for another month
Source: LAist
A temporary ban on rent hikes of more than 10% after January’s wildfires will continue for another month in Los Angeles County after elected leaders voted to push back a rapidly approaching deadline.
Under an emergency order issued by Gov. Gavin Newsom in March, price gouging limits for rental housing were set to end on July 1. The L.A. County Board of Supervisors voted to extend the rent gouging ban until July 31.
Mortgage refinance demand surges, as interest rates drop further
Source: CNBC
Mortgage rates fell last week to the lowest level since April, leading current homeowners to seek savings. Applications to refinance a home loan rose 7% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand was 40% higher than the same week one year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, decreased to 6.79% from 6.88%, with points falling to 0.62 from 0.63, including the origination fee, for loans with a 20% down payment. That rate is 24 basis points lower than the same week one year ago.
Market Minute
The U.S. economy encountered some notable developments in the past few weeks, including a decline in new home sales, shifts in consumer confidence, and changes in unemployment claims. While these trends reflect ongoing economic adjustments, they also highlight the dynamic nature of the market and the economy. Rising prices for goods and increasing property insurance costs are also part of the evolving economic landscape. So far, businesses and consumers are able to navigate these changes and adapt their strategies and expectations to the current environment. Hopefully, they will continue to demonstrate their resilience and flexibility in the second half of the year.
June 2025 (June Is National Homeownership Month)
Center for California Real Estate hosts experts to discuss homeowners insurance crisis
Source: Longview News-Journal
As California faces mounting challenges in its homeowners insurance market, the Center for California Real Estate (CCRE) brought together a distinguished group of expert leaders for a groundbreaking event aimed at identifying actionable solutions to one of the state’s most urgent issues.
This exclusive sandbox event convened nearly two dozen experts from the insurance industry, academia, government, and consumer advocacy for a candid, cross-sector dialogue. With homeowners across the state grappling with shrinking coverage options and soaring premiums, the event offered a rare opportunity for collaborative problem-solving at a critical moment. Key themes discussed include regulatory and policy innovation; reform of the California FAIR Plan and wildfire mitigation strategies. Panelists also reviewed comparative models from other states and countries for actionable insights and best practices. The insights and ideas generated during the session will be synthesized into a formal report later this summer.
Calif. is launching a mortgage relief program for fire survivors
Source: LAist
Despite their homes burning down in the Eaton and Palisades fires, survivors still have to pay their mortgages. Now, the state of California is offering grants that could help some homeowners defray costs as they begin efforts to rebuild. On Thursday, the California Housing Finance Agency launched the CalAssist Mortgage Fund program. Applicants can qualify for up to three months of mortgage payments, with a maximum grant of $20,000. Officials said the relief does not need to be repaid.
Online applications will be accepted starting June 12 at CalAssistMortgageFund.org. Officials are urging homeowners to apply quickly, because once the program’s $105 million in funding runs out, future requests will be denied. In order to qualify, an applicant’s primary residence must have been destroyed in a California disaster that occurred between Jan. 1, 2023 and Jan. 8, 2025. This year’s Palisades and Eaton fires are included, as well as previous disasters across the state, such as the 2024 Park Fire and Hurricane Hilary in 2023. Applicants also need to meet the program’s income limits. In Los Angeles County, the maximum annual income will be $140,700, regardless of household size, officials said.
San Benito County reigns supreme in housing construction speed
Source: The Real Deal
When it comes to building the most new housing in California, one rural county in the Central Coast leads the pack. Data from the California Department of Finance shows that San Benito County, south of San Jose, has built homes at the fastest rate in the state over the past five years. It saw a 9.3 percent increase in housing construction between April 2020 and January 2025, more than double the rate seen in San Francisco in the same time frame.
San Benito County’s growth, which was less than 2,000 new units, was largely concentrated in the city of Hollister. The town made famous by the clothing store of the same name has become increasingly popular among Silicon Valley workers since the pandemic. Though California in general has seen a slowdown in housing construction compared to states like Texas, smaller and midsized inland counties have been outpacing the major cities in housing growth relative to population.
Banks are avoiding mortgages in California’s fire zone, study says
Source: The Washington Post
California’s growing wildfire risk is affecting the state’s mortgage market, a new study has found, with brick-and-mortar banks approving fewer home loans in risky areas – while their online counterparts are continuing to lend there. The study is the latest sign that major banks are worried about how global warming could affect their balance sheets – and are taking steps to limit their exposure that could ultimately make it harder for Americans to get home loans.
“What we see over time is the traditional lenders are tightening credit – they are adapting to the risks,” said researcher Jesse Keenan, director of the Center on Climate Change and Urbanism at Tulane University’s School of Architecture and co-author of the study. But online or “fintech” lenders that don’t have physical branches “are coming in and taking up market share,” he said. Using data on wildfire risk from the Federal Emergency Management Agency (FEMA), Keenan and Tyler Haupert, an assistant professor of urban studies at NYU, looked at how traditional and online mortgage lenders were approaching census tracts in California that had been assigned very high fire-risk scores and compared them with parts of the state that are considered less vulnerable.
Calif. lawmakers push for CEQA reforms to address housing crisis
Source: KTLA
Several California bills could lead to significant reforms of the state’s environmental review law, with the goal of addressing the state’s ongoing housing crisis. One of the bills, Assembly Bill 609, would establish a CEQA exemption for most urban housing developments. The bill is part of the Fast Track Housing Package, a collection of 20 bills that aim to expedite the approval of housing projects.
The California Environmental Quality Act (CEQA), enacted in 1970, requires public agencies in California to evaluate the potential environmental impacts of proposed projects and avoid those impacts, if possible. However, many argue that the law has been weaponized to block new housing projects and developments. “Preparation of an Environmental Impact Report under CEQA can take a year or longer and cost hundreds of thousands of dollars, or even, in some cases, more than $1 million,” a 2024 report from the bipartisan Little Hoover Commission said.
Mortgage demand drops for third week, even as interest rates ease
Source: CNBC
Mortgage rates fell slightly last week, but that did nothing to spur mortgage demand. Total mortgage application volume dropped 3.9 percent last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (of $806,500 or less) decreased to 6.92 percent from 6.98 percent, with points decreasing to 0.66 from 0.67, including the origination fee, for loans with a 20 percent down payment. Applications to refinance a home loan, which are most sensitive to weekly rate moves, still declined 4 percent for the week but were 42 percent higher than the same week one year ago. Applications for a mortgage to purchase a home fell 4 percent for the week but were 18 percent higher than the same week one year ago. The spring season has been sluggish to say the least, with closed sales still coming in lower than last year, despite mortgage demand now being higher. The main driver of increased purchase demand is simply more supply on the market. Given how much more there is, however, the highest level in five years, sales should be even stronger.
CA Launches CalAssist Fund to Aid Homeowners Affected by Disasters
California is launching the CalAssist Mortgage Fund on June 12, 2025, to provide $105 million in relief offering up to $20,000 to homeowners whose homes were destroyed in recent disasters, including the Los Angeles firestorms.
This new disaster mortgage relief program, managed by the California Housing Finance Agency (CalHFA), will be paired with $25 million in additional housing counseling support through CalHFA’s National Mortgage Settlement Housing Counseling Program, and none of the funds impact the proposed 2025-2026 budget.
The CalAssist Mortgage Fund provides relief for the most vulnerable homeowners whose homes have been destroyed or left uninhabitable as the result of a disaster that received a State of Emergency proclamation by the Governor or a Major Disaster Declaration approved by the President between January 2023 and January 2025, such as the Eaton Fire, Palisades Fire, Park Fire and San Diego floods.
Market Update
The housing market remains soft but is showing signs of improvement. The Home Purchase Sentiment Index, for example, reached a six-month high in May, reflecting improved consumer sentiment towards buying and selling homes. Home price reductions, on the other hand, have climbed to levels last seen in 2016 due to elevated mortgage rates and increased inventory. Mortgage demand dipped slightly at the end of May but remained higher than last year’s level. Meanwhile, U.S. job growth exceeded expectations last month, although downward revisions to previous months suggest that the labor market is losing some momentum.
U.S. inventory exceeds 1M homes for sale
Source: Newsweek
The number of homes for sale in the U.S. market has just passed the 1 million mark, according to data from Realtor.com and Reventure App, as inventory continues piling up in the market without finding enough willing buyers. Before the pandemic, in May 2019, there were 1,180,934 active listings on the U.S. market, according to Realtor.com and Reventure App data. During the pandemic homebuying frenzy, spurred by historically low mortgage rates and the rise of remote work, U.S. housing inventory plunged to 447,670 in May 2021 – a shortage that brought up prices for the few homes available on the market.
Since then, inventory crawled back up slowly, but it has never been as high as it is now: last month was the first May since 2019 when active listings were above the 1 million mark. This surge in the number of homes for sale is putting downward pressure on home prices in some areas. Active listings have been growing over the past few months in part because of new homes landing on the market, and in part because existing homeowners who were waiting for mortgage rates to come down to sell their homes have resigned to the fact that it is unlikely to happen anytime soon.
Mortgage misconceptions continue to fuel buyer anxiety
Source: MPAMag
A large majority of Americans continue to view homeownership as a key life milestone, but rising anxieties around affordability and mortgage misconceptions reveal an urgent need for better homebuying education, according to new survey findings from KB Home. In its second annual national survey, conducted by the Harris Poll, KB Home found that 83 percent of Americans still see owning a home as a major life goal. However, 89 percent reported feeling anxious about the process, with affordability concerns, financial stress, and a lack of knowledge fueling buyer hesitation.
The top reasons Americans want to own a home include greater safety and security (47 percent), more space (47 percent), access to outdoor areas like backyards (43 percent), avoiding rent hikes (42 percent), and long-term financial improvement (41 percent). The survey also uncovered major knowledge gaps that could be holding prospective buyers back. Sixty-nine (69) percent mistakenly believe mortgage rates are at an all-time high or are unsure. In fact, rates peaked in 1981 at 18.6 percent, far above today’s average of 6.8 percent. Only 37 percent knew that a 20 percent down payment isn’t required, and just 25 percent were aware that a mortgage is possible with a credit score in the 500s.
U.S. wholesale inflation heated up in May
Source: CNN
U.S. wholesale inflation rose slightly in May, driven in part by costlier goods; however, tariff-related effects were largely muted. The latest Producer Price Index, a closely watched measurement of wholesale inflation showed that prices paid to producers rose 0.1 percent in May, lifting the annual rate to 2.6 percent, according to Bureau of Labor Statistics data released Thursday.
Economists were expecting that prices would rise 0.2 percent from April and 2.6 percent for the 12 months ended in May. Economists warn, however, that sweeping tariffs are expected to eventually result in some price increases for consumers. The upswing marked a turnabout from a 0.2 percent drop in April, which was driven largely by wholesalers and retailers’ margins being squeezed, which economists attributed to high tariffs
41% of CA households “cost burdened”
Source: Yahoo! Finance
In California, where homes cost about twice as much as the typical U.S. home, 41.1 percent of households were cost-burdened in 2023 – the highest proportion in the country, according to California’s Legislative Analyst’s Office housing affordability tracker. The U.S. Dept. of Housing and Urban Development considers homeowners cost-burdened if they spend more than 30 percent of their monthly income on housing, including utilities. They’re severely cost-burdened if that figure tops 50 percent. Severely cost-burdened households may have difficulty affording necessities such as food, clothing, transportation and medical care, according to HUD.
Mortgage lenders generally require that an applicant’s payments for principal, interest, taxes and insurance don’t exceed 25 percent to 28 percent of their gross monthly income. Combined with long-term debt, total obligations usually shouldn’t exceed 33 percent to 36 percent.
Air board rejects smog rules phasing out gas appliances
Source: CalMatters
After a contentious, five-hour hearing, Southern California air quality regulators rejected measures that would have phased out residential gas-powered water heaters and furnaces in the Los Angeles basin. The two rules, designed to clean up one of the biggest sources of the region’s severe smog, would have set increasing targets for sales of zero-emission products in Los Angeles, Orange, Riverside and San Bernadino counties for the next decade – beginning with 30 percent in 2027. The targets would not have been mandatory, although manufacturers would pay fees for each natural gas water heater or furnace they sell.
The South Coast Air Quality Management District board in a 7-5 vote rejected its boldest smog-fighting proposal in years. The decision, driven mostly by concerns about affordability, was a rare rebuke of measures proposed by the agency’s staff, which came after years of compromise and efforts to scale back what originally was a mandate phasing out the polluting heaters. The board voted 7-4 to send the two proposed rules back to a committee, which means any new version likely won’t be considered until next year. More than 200 people testified at the hearing, and the agency received more than 30,000 written comments, fueled by an aggressive push of opposition from the gas and building industries.
Mortgage demand rises to highest level in over a month
Source: CNBC
Mortgage interest rates barely moved at all last week, but demand from homebuyers as well as those looking to refinance a current home loan increased. Total mortgage application volume rose 12.5 percent last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. While the weekly move may seem large, the volume is still quite low historically.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (of $806,500 or less) increased to 6.93 percent from 6.92 percent, with points decreasing to 0.64 from 0.66, including the origination fee, for loans with a 20 percent down payment. Applications to refinance a home loan, which are most sensitive to weekly rate moves, rose 16 percent for the week and were 28 percent higher than the same week one year ago. Applications for a mortgage to purchase a home climbed 10 percent for the week and were 20 percent higher than the same week one year ago. Much of that may be due simply to the increase in available listings. Supply is now about 31 percent higher than it was at this time last year, according to Realtor.com.
California Home Sales Retreat for Second Straight Month in April, as Median Home Price Hits New All-time High
Amid an environment of economic uncertainty during April, California’s housing market retreated for the second straight month, while the median home price reached an all-time high, surpassing $900,000 for the first time in 10 months, C.A.R. reported.
April’s sales pace fell 3.4 percent from the 277,030 homes sold in March and was down 0.2 percent from a year ago, when 268,170 homes were sold on an annualized basis. April’s sales level was the lowest in three months.
Statewide pending sales in April slipped from last year’s level for the fifth consecutive month as housing sentiment continued to trend downward. The dip in open escrows is likely due partly to mortgage rates spiking and staying elevated throughout the month of April after President Trump’s reciprocal tariff announcement on April 2
Market Update
California’s housing market reached a record high median price of $910,160 in April, marking the 22nd consecutive month of year-over-year increases. Home sales, on the other hand, declined for the second time in four months, as economic uncertainty and elevated interest rates continued to beat down on housing sentiment. Despite inflation easing to a four-year low in April, consumers remain worried about the economy as retail sales growth dipped sharply from the previous month. Until we have more clarity on the ongoing trade negotiations, consumers will likely remain cautious about home buying and selling in the near term. Home sales, as such, could remain soft in the next couple of months.
Congress Moves Closer to Reconciliation Package with Key Provisions for Real Estate
Congress is making progress on a major reconciliation tax reform package, with House committees completing work on their individual sections.
Regarding homeownership, the package does not include some proposals long supported by REALTORS®, such as increasing the capital gains exclusion on the sale of a primary residence and incentives to convert commercial properties to residential use. However, the package does contain a proposed increase to the State and Local Tax (SALT) deduction cap, to $30,000 for individuals and couples under specific income thresholds. While this targeted relief won’t reach all taxpayers, it represents an improvement over the current cap and reflects growing momentum in Congress to revisit SALT policy. Lawmakers from high-cost states, including members of the SALT Caucus such as California’s U.S. Representative Young Kim, continue working for further improvements as the bill moves forward.
Finally, the bill also includes several provisions that align with real estate priorities, particularly in the commercial space. Extending the Opportunity Zones program and improvements to the Low-Income Housing Tax Credit (LIHTC) represent important steps to support rental housing production and community development. These tools will help strengthen investment in underserved areas and expand affordable rental housing options.
The next step in the process is for House leadership to assemble the full bill package and bring it to the floor for a vote. Once passed in the House, the bill will move to the Senate, where additional changes may occur. A final version will need to be agreed upon by both chambers before it heads to the president for signature. While a few items still require negotiation to secure final support, the House is expected to vote on its version of the package in the coming weeks.
April home sales hit slowest pace for that month since 2009
Source: CNBC
The spring housing market continues to struggle amid high interest rates and low consumer confidence. Sales of previously owned homes in April declined 0.5 percent from March to a seasonally adjusted, annualized rate of 4 million units, according to the National Association of REALTORS®. That is the slowest April pace since 2009.
Sales were down 2 percent from April of last year. Housing economists were expecting a gain of 2.7 percent. This count is based on closings, meaning contracts that were likely signed in February and March, before mortgage rates moved higher in April. “Home sales have been at 75 percent of normal or pre-pandemic activity for the past three years, even with seven million jobs added to the economy,” said Lawrence Yun, NAR’s chief economist. Inventory jumped 9 percent month to month and was nearly 21 percent higher than April of last year. More supply is starting to cool prices.
Home sellers are setting “aspirational” prices; buyers have other ideas
Source: Yahoo! FinanceIn the heart of the traditional spring homebuying season, sellers are enthusiastically listing. But increasingly, buyers just aren’t materializing. Inventory of for-sale homes continues to surge in much of the country, but sales aren’t keeping up. In fact, they are down from a year ago. In many cities, the shifting market has increasingly allowed buyers to be picky as homes stay on the market longer.
One driving factor: Sellers are aiming high with their listing prices, even if it means dropping them later. On Zillow, nearly 25 percent of listings had a price cut in April, the highest share since at least 2018, the listing platform said. Brokerage Redfin found that homes in March ultimately sold for 9 percent less than the list price. The gap between buyers and sellers hasn’t been that big since May 2020, when pandemic lockdowns were causing major market disruptions. The mismatched pricing expectations reflect a growing divide in financial security between those who already own homes and those who are trying to gain access to the market for the first time this spring. Compared to a year ago, buyers are doing at least a little better. Incomes are generally rising, and mortgage rates are slightly lower than this time last year, helping boost buying power.
Insurance commissioner announces new smoke claims & remediation task force
Source: KMJ Now
As California faces the aftermath of some of the worst wildfires in its history – urban conflagrations that have devastated entire neighborhoods and spread toxic soot and ash across wide regions – Insurance Commissioner Ricardo Lara announced the formation of a new Smoke Claims & Remediation Task Force within the California Department of Insurance.
The new task force will bring together public health experts, environmental health professionals, smoke remediation specialists, fire safety experts, and consumer advocates to recommend science-based standards, best practices for smoke restoration of homes and personal property, and enforcement tools to the Department that ensure Californians are treated fairly in the wake of wildfire smoke exposure.
What America’s latest credit downgrade means for mortgage rates
Source: Investopedia
The downgrade of the U.S. sovereign credit rating on Friday will likely mean higher borrowing costs on mortgages. On Friday, Moody’s downgraded its rating for debt held by the U.S. government one notch to the second-highest run on its 21-level scale of creditworthiness, citing the government’s persistent and likely worsening budget deficit. Moody’s was the last major credit rating agency to downgrade the U.S. from the highest rating, following S&P in 2011 and Fitch in 2023.
The stock market largely shrugged off the downgrade as old news: the ding to the government’s credit had been brewing since at least 2023, when Moody’s changed its outlook for the rating to “negative” from “stable.” But it was a different story for the bond market, where government-issued debt is bought and sold. Yields on 10-year treasuries – the interest the government pays to borrow money for a decide – are especially sensitive to credit downgrades. For consumers, higher yields on the 10-year treasury have a major consequence in the form of higher mortgage rates. Interest rates on 30-year fixed mortgages are tied to treasury yields, so the uptick could mean higher borrowing costs for homebuyers. Mortgage rates are unlikely to lower in the foreseeable future.
Mortgage demand drops after interest rates jump
Source: CNBC
After shifting in a narrow range for several weeks, mortgage rates moved decidedly higher last week. That caused a 5.1 percent drop in mortgage applications compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (of $806,500 or less) increased to 6.92 percent from 6.86 percent, with points rising to 0.69 from 0.68, including the origination fee, for loans with a 20 percent down payment. Applications for a mortgage to purchase a home, which had been rising for a few weeks, dropped 5 percent for the week and were 13 percent higher than the same week one year ago. Homebuyers are seeing many more listings on the market than they did even a few months ago, but higher interest rates, combined with increasing concern over the state of the economy and inflation, have chilled the usually busy spring season. Applications to refinance a home loan also fell 5 percent for the week and were 27 percent higher than the same week one year ago.
Housing contract activity dropped sharply in April
Source: Yahoo! Finance
Home contract signings took a nosedive in April as high mortgage rates and tariff uncertainty weighed on prospective buyers. The Pending Home Sales Index fell 6.3 percent in April from a month earlier to 71.3, according to the National Association of REALTORS®. Economists had been expecting a more modest 1 percent decline. A reading of 100 is equal to the level of housing contract activity in 2001. Homes usually go under contract a month or two before they’re sold, and while not all contracts close, pending home sales are typically an early indicator of housing market activity.
Year over year, pending contracts were down 2.5 percent nationwide. Contract activity was down month over month in all parts of the country and decreased year over year in all regions except the Midwest, which saw a 2.2 percent gain. Although 30 percent more homes were for sale in April than one year prior, prices are still near all-time highs, and mortgage rates remain well above 6 percent, making the market unaffordable for many.
Don’t expect home prices and rates to go down
Source: MPA Mag
Fannie Mae lowered its interest rate forecast on Wednesday, expecting rates to end 2025 at 6.1 percent and 2026 at 5.8 percent. Meanwhile Redfin reported this week that home prices declined by 01 percent in April, marking the first drop since 2022. Elevated interest rates and rising home prices have caused many potential homebuyers to pause looking for a new home. But while home price increases are slowing and lower rates are forecasted, one broker reminds customers not to expect either to plummet in the future.
Stacey Melton, vice president at Reasy Financial, notes that one of the biggest reasons there won’t be a crash now, like there was in 2008, is that mortgages on the books are much more solid. Back in 2005 and 2006, “if you had a good credit score and a pulse, you could get a mortgage,” says Melton. “Now it’s way harder to buy a house than it was then. We’ve prepared the mortgage economy to be stabilized, so we’re not going to go through that crash like we did before.” Melton encourages customers to act now if it makes sense for their situation, because if “interest rates do come down, people will be lining up to buy.”
Housing contract activity dropped sharply in April
Source: Yahoo! Finance
Home contract signings took a nosedive in April as high mortgage rates and tariff uncertainty weighed on prospective buyers. The Pending Home Sales Index fell 6.3 percent in April from a month earlier to 71.3, according to the National Association of REALTORS®. Economists had been expecting a more modest 1 percent decline. A reading of 100 is equal to the level of housing contract activity in 2001. Homes usually go under contract a month or two before they’re sold, and while not all contracts close, pending home sales are typically an early indicator of housing market activity.
Year over year, pending contracts were down 2.5 percent nationwide. Contract activity was down month over month in all parts of the country and decreased year over year in all regions except the Midwest, which saw a 2.2 percent gain. Although 30 percent more homes were for sale in April than one year prior, prices are still near all-time highs, and mortgage rates remain well above 6 percent, making the market unaffordable for many.
Source: MPA Mag
Fannie Mae lowered its interest rate forecast on Wednesday, expecting rates to end 2025 at 6.1 percent and 2026 at 5.8 percent. Meanwhile Redfin reported this week that home prices declined by 01 percent in April, marking the first drop since 2022. Elevated interest rates and rising home prices have caused many potential homebuyers to pause looking for a new home. But while home price increases are slowing and lower rates are forecasted, one broker reminds customers not to expect either to plummet in the future.
Stacey Melton, vice president at Reasy Financial, notes that one of the biggest reasons there won’t be a crash now, like there was in 2008, is that mortgages on the books are much more solid. Back in 2005 and 2006, “if you had a good credit score and a pulse, you could get a mortgage,” says Melton. “Now it’s way harder to buy a house than it was then. We’ve prepared the mortgage economy to be stabilized, so we’re not going to go through that crash like we did before.” Melton encourages customers to act now if it makes sense for their situation, because if “interest rates do come down, people will be lining up to buy.”
Fannie, Freddie OTC shares rise as Trump prepares to sell
Source: Reuters
Over-the-counter (OTC) shares of Fannie Mae and Freddie Mac rose on Wednesday after U.S. President Donald Trump said he was working on taking the housing giants public. The administration wants to end the long-standing conservatorship of Fannie Mae and Freddie Mac, which have been under the U.S. government’s control since 2008 after they suffered heavy losses during the subprime mortgage crisis.
The two companies back the majority of the nation’s residential mortgages. Fannie shares rose 3.7 percent to $10.92, while Freddie gained 7 percent to $8.13 by midday trading after a double-digit jump earlier in the session. The shares, which don’t trade on major exchanges, hit their highest since 2008 after Trump said last week he was mulling a spinoff of the U.S. mortgage finance firms. Currently, the United States Treasury owns preferred shares in the firms and warrants to purchase about 80 percent of their common stock. The combined value of the two companies was $17 billion as of the last closing price. They have shot up more than five-fold in value in the past year.
U.S. labor market slows; corporate profits drop most since 2020
Source: Reuters
The number of Americans filing new applications for jobless benefits increased more than expected last week and the unemployment rate appeared to have picked up in May, suggesting layoffs were rising as tariffs cloud the economic outlook.
Initial claims for state unemployment benefits rose 14,000 to a seasonally adjusted 240,000 for the week ended May 24, the Labor Department said. Economists polled by Reuters had forecast 230,000 claims for the latest week. The number of people collecting unemployment checks in mid-May was the largest in 3.5 years. The dimming economic outlook was reinforced by other data showing corporate profits declining by the most in more than four years in the first quarter, pulled down by nonfinancial domestic industries for which Trump’s aggressive trade policy was making it harder for businesses to plan ahead – a sentiment echoed by a Conference Board survey on Thursday, which showed confidence among CEOs plummeting in the second quarter.
Most baby boomers can’t afford assisted living and stay in homes
Source: Yahoo! Finance
Baby boomers are dragging on the housing market because most can’t afford to move out of their homes, according to Meredith Whitney, the “Oracle of Wall Street” who predicted the Great Financial Crisis. In an interview on Bloomberg TV, she said that many cash-strapped Americans have been borrowing against their homes, and 44 percent of home-equity loans are being taken out by seniors.
That’s contrary to the typical narrative of baby boomers sitting on vast amounts of wealth accumulated over their lifetimes, which spanned unprecedented economic expansions and stock market booms. As a result, seniors with a lot of money have an edge in the tight housing market, accounting for 42 percent of all homebuyers, while millennials account for 29 percent despite the younger generation being in the prime buying years. But while most buyers are boomers, it doesn’t mean most boomers have a giant pile of cash. Boomers collectively have $75 trillion of wealth, but that’s not distributed evenly, and Whitney estimated that just one in 10 seniors can afford assisted-living facilities.
Mortgage rates highest since January, but homebuyers eager
Source: CNBC
Mortgage rates rose for the third straight week last week to the highest level since January, but some homebuyers were undeterred. Mortgage applications to purchase a home climbed 2 percent compared with the previous week and were 18 percent higher than the same week one year ago, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (of $806,500 or less) increased to 6.98 percent from 6.92 percent, with points decreasing to 0.67 from 0.69, including the origination fee, for loans with a 20 percent down payment. Applications to refinance a home loan fell 7 percent for the week but were 37 percent higher than the same week one year ago. “The Consumer Confidence Index was stronger than expected, but one of its components raised concern over the labor market,” wrote Matthew Graham, chief operating office at Mortgage News Daily. “Weaker labor conditions tend to push rates lower, all else equal. The underlying bond market improved after that and several mortgage lenders issued revised rates in response.”
June Is National Homeownership Month
June is National Homeownership Month, when we raise awareness about the benefits of owning a home and the importance of making homeownership more attainable for all Americans.
Every family deserves to have the opportunity to reap the benefits of homeownership—from building generational wealth to building memories for years to come. As a REALTOR®, you help consumers navigate the homeownership experience, providing critical support and serving as a trusted advisor through one of the biggest financial decisions of their lifetime.
See the resources NAR created for National Homeownership Month, including social media graphics, a digital toolkit, and an upcoming webinar at the link below.
Market Update
The latest economic and market news presents a mixed picture of optimism and concern. Consumer confidence showed a partial rebound in May, driven by the recent U.S./China trade agreement, which boosted optimism and improved the future outlook. However, CEO confidence has significantly declined due to rising concerns about geopolitical instability and tariffs, with many CEOs anticipating a recession in the next 12-18 months. And while the Fed’s preferred inflation gauge continues to ease, potential price hikes by major retailers could reverse this trend in the weeks ahead. In the meantime, the housing market is being put on hold, with mortgage rates staying high, delinquency rates remaining steady, and construction spending declining for the third consecutive month as developers continue to wait and see.
May 2025
State Farm wins first-ever emergency rate-hike in California
Source: LAist
State Farm can raise homeowners and other rates starting next month, becoming the first insurance company to win approval to do so on an emergency interim basis in California. The state’s largest insurer made the unprecedented request for emergency rate hikes earlier this year, after it said it was in financial distress and expected more than $7 billion in claims because of the Los Angeles County fires in January.
The state Insurance Department staff recommended approval of the company’s request, but the Insurance Commissioner Ricardo Lara asked the company for more information about its finances. He also asked whether the insurer could return to its parent company, State Farm Mutual, for help. Lara then conditionally approved but punted the official decision to a judge, who oversaw a three-day public hearing last month to consider the proposed agreement between the department and the insurer. The judge released the decision on Tuesday. The decision means State Farm can raise its rates an average of 17 percent for homeowners, 15 percent for renters and condominiums, and 38 percent for rental dwellings starting June 1.
California homebuyers catch break, but uncertainty persists
Source: Pasadena Now
California’s notoriously tight housing market offered a flicker of relief in the first quarter of the year, with home affordability inching upward even as broader economic uncertainties – including international trade tensions and fluctuating mortgage rates – continued to loom. According to the CALIFORNIA ASSOCIATION OF REALTORS®, the state’s housing affordability index rose by two points to 17 percent, marking a modest improvement from the fourth quarter of 2024. That figure remains historically low – meaning fewer than one in five households can afford a median-priced single family home – but it is a welcome sign for buyers after months of stagnation.
The median home price continued its slow upward trend, while average monthly mortgage payments dropped slightly by 1.8 percent quarter-over-quarter, thanks in part to seasonal adjustments and minor income gains. Still, year-over-year payments rose 4.6 percent, underscoring how far out of reach homeownership remains for many Californians.
Treasury yields rise as US-China tariff truce lowers Fed rate cut expectations
Source: MPA Mag
Mortgage rates could face upward pressure after the 10-year treasury yield jumped Monday, following a US-China deal to pause tariffs that cooled expectations for Federal Reserve interest rate cuts. That yield, a key benchmark for U.S. mortgage rates, climbed seven basis points after Washington and Beijing agreed to a 90-day tariff truce, leading traders to lower the odds of an imminent central bank rate reduction. U.S. officials said massive charges on most Chinese imports would be reduced from 145 percent to 30 percent by May 14, while China will clip its counter-tariffs on U.S. goods to 12 percent from 130 percent.
The détente, which gives both sides three months to agree to a wider trade deal, dramatically lowered the changes of a sharp U.S. economic downturn and boosted confidence on Wall Street, with S&P futures posting a gain of more than 3 percent on the back of the news.
Nationally, housing more affordable for middle-income earners
Source: Fox News
A newly released report from the National Association of REALTORS (NAR) and Realtor.com found that nationwide inventory has gone up compared to last year as of March, but “access to affordable homes remains out of reach for many buyers.” Among the income levels that the report looked at nationally, middle-income buyers with $75,000 in annual pay saw the biggest year-over-year increase in the share of homes listed on the market that they are financially able to purchase, going from 20.8 percent in March 2024 to 21.2 percent this year.
At the same time, that remains 27.6 percentage points lower than the share in pre-pandemic 2019 and 26.9 percentage points short of what they should be capable of buying in a balanced market, according to the report. Middle-income buyers have an “affordability gap” of more than 415,900 homes across the country priced below $254,780. “This income group face the largest shortage of affordable listings, said NAR Senior Economist and Director of Real Estate Research Nadia Evangelou. “So middle-income buyers gained the most and that’s very encouraging, yet still have the furthest to go, so there is this middle-income paradox, like biggest gains and biggest gaps.”
Powell warns of volatile inflation with tariffs’ impact
Source: CNN
U.S. wholesale prices sank in April, logging their biggest monthly drop since COVID stifled the economy, as tariffs put a squeeze on profit margins, according to new data released Thursday. The Producer Price Index, a closely watched measurement of wholesale inflation, showed that the prices paid to U.S. producers dropped 0.5 percent in April from the month before, according to Bureau of Labor Statistics data. Economists were expecting monthly prices to rise in April by 0.2 percent and to slow to 2.4 percent on an annual basis. A driving force behind the downward monthly swing was a 1.7 percent plunge in trade services, a category that measures gross margins for wholesalers and retailers.
Although it’s a volatile category, the sharp downward swing in trade services indicates that companies’ margins are being eaten away by higher costs from President Trump’s tariffs, said Joe Brusuelas, chief economist at RSM US. Separately on Thursday, Federal Reserve Chair Jerome Powell warned that “supply shocks” could force the central bank to keep rates higher over the long term. On Tuesday, the latest Consumer Price Index data showed that overall inflation cooled further for the goods and services Americans commonly purchase. However, some economists pegged some of that softening to weaker demand.
Homebuyer mortgage demand continues to recover despite rates
Source: CNBC
Mortgage demand from homebuyers rose for the second straight week, suggesting that potential buyers are now more enticed by the increasing supply of houses for sale than they are dissuaded by recent economic uncertainty and concern over tariffs. Total mortgage application volume rose 1.1 percent last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (of $806,500 or less) increased to 6.86 percent from 6.84 percent, with points unchanged at 0.68, including the origination fee, for loans with a 20 percent down payment. Applications for a mortgage to purchase a home rose 2 percent for the week and were 18 percent higher than the same week one year ago. Applications to refinance a home loan fell 0.4 percent for the week but were 44 percent higher than the same week one year ago. The refinance share of mortgage activity decreased to 36.4 percent of total applications from 37.1 percent the previous week.
6 Ways to Take Advantage of a Bad Market
April 11, 2025 • Rob Williams
Certain moves could make more sense during a bad market than during a good one. Here are six.
Tariff, growth, and inflation concerns have been hammering the market in recent weeks. Investors looking for silver linings among all the clouds overhead could feel hard-pressed to find one.
Often, one of the best ways to approach a daunting environment is to remain focused on your goals. If you don’t have to sell anything, you won’t necessarily have to suffer any real losses. And if you can stick to an investing plan, you might be able to pick up some assets at prices better than we’ve seen in a while—so long as they fit with your strategy and goals.
However, patience isn’t the only response. In fact, certain moves could make more sense during a bad market than during a good one. To be clear: This isn’t a call for investors to try to time the market by jumping in when they think asset prices are at their lowest or out when they’re at their highest. Rather, the moves we’ll cover here focus more on tax planning and portfolio maintenance for the longer-term investor.
So, what silver-lining moves do we see?
– Tax-loss harvesting. Investors often want to avoid selling anything at a loss, but selling a losing position can mean significant tax benefits if you have capital gains or income to offset. Why? You can use your losses to lower your capital gains all the way to zero. And if you have more losses than gains, you can offset up to $3,000 of your ordinary income each year. Tax-loss harvesting can also be an opportunity to sell underperforming investments or to re-diversify overly concentrated stock positions (just be aware of wash sale rules).
– Increased retirement savings. Down markets can be a good time to contribute more to your 401(k) or individual retirement account (IRA), as your dollar goes a lot further when assets are selling at depressed prices. If you’re the kind of person who typically waits until the end of the year to make an IRA contribution, consider doing so earlier, so you can have more time in the market and position yourself for any potential recovery. And if you have more cash in a health savings account (HSA)than you’ll need to cover out-of-pocket medical expenses for the next year or two, consider investing those excess funds. Any gains you can earn there could help pay for medical bills in the future.
– 529 plan contributions. Similar arguments apply to funding a 529 college saving plan. You can boost an account’s value by bundling five years of annual gift tax exclusion amounts—totaling up to $95,000 (or $190,000 per couple) in 2025— without reducing your lifetime gift tax exclusion amount ($13.99 million in 20225).
– Roth conversions. Converting assets from a tax-deferred IRA to an after-tax Roth account while your account balance is down could help lower the resulting taxes. If the assets recoup their losses later, they could provide additional tax-free growth and withdrawals over time—potentially even enough to offset the tax hit from the conversion.
– Incentive stock options (ISOs). Investors subject to the Alternative Minimum Tax (AMT) face limits on how many ISOs they can exercise before sacrificing some of their options’ tax advantages. (In short, the spread between the stock’s fair market value and the exercise price of the option could be treated as income in the tax year you exercise your options, potentially leading to additional taxes.) When markets are down, however, you can exercise more ISOs while staying under the AMT exemption ($88,100 for single filers or $137,000 for married filing jointly in 2025). Equity awards can be complicated, so make sure you check with your equity compensation planner and tax advisor before making any moves.
– Certain estate planning strategies. Wealthy individuals and families looking to lighten the burden of gift and estate taxes could consider transferring depressed assets to a trust. For example, one sophisticated estate-planning strategy would involve shifting assets you believe will appreciate substantially in your lifetime into a grantor retained annuity trust (GRATs). A GRAT allows you to move some of that potential future appreciation out of your estate, thereby reducing its overall size. It works like this: The GRAT’s creator transfers assets into a fixed-term, irrevocable trust. During the term (of at least two years), the creator receives annuity payments that pay the value of the assets back to them in their entirety—plus a fixed interest (or “hurdle”) rate set by the IRS. When the term expires, any growth in the invested assets over and above the hurdle rate passes to the trust’s beneficiaries tax-free. (Note: Naming grandchildren as a GRAT’s beneficiaries could trigger generation-skipping transfer taxes. Consult a tax professional before making any decisions.)
Keep cool
Again, if you’re sticking with your plans and can handle seeing a smaller number on your account value, you may not need to do anything when the market falls. It’s never a good idea to act for action’s sake, especially if there’s a chance doing so amid the turbulence of a rough market will make it harder for you to participate in any future recovery or accomplish your most important financial goals.
Sometimes, though, a bad market can actually be an opportunity to set yourself up for something better later on.
Tax-Efficient Investing: Why Is It Important?
April 9, 2025 • Hayden Adams
Making tax-efficiency part of your investing strategy can help lower your tax bill.
Taxes are everywhere, every day, to such an extent that one might let that all-important, mid-April deadline for filing your annual tax returns sneak up on you. One problem with waiting until the last minute: by that point, it may be too late to implement an efficient investment strategy for minimizing your tax bill.
Returns lost to taxes
For investors, it’s not just how much you make that matters—it’s how much you keep after taxes. The amount lost to taxes and other costs is one key factor affecting your returns, according to research done by the Schwab Center for Financial Research. Even small amounts lost to taxes can quickly add up over the years, so anything you can do to reduce the drag of taxes will help in the long run.
The good news is you can exercise more control than you may realize over your taxes. With a bit of planning, you can make your portfolio more tax-efficient and hold onto a greater share of your investment returns.
How do I maximize tax efficiency?
A big part of tax efficiency is putting the right investment in the right account.
Investment accounts can be divided into two main categories:
– Taxable accounts, such as brokerage accounts, are good candidates for investments that tend to lose less of their returns to taxes.
– Tax-advantaged accounts, such as an IRA, 401(k), or Roth IRA, are generally a better home for investments that lose more of their returns to taxes.
What does that mean in practical terms? Here we’ve matched some common kinds of investments with taxable or tax-advantaged accounts:
Where tax-smart investors typically place their investments
TAXABLE ACCOUNTS
Ideal for:
TAX-ADVANTAGED ACCOUNTS*
Ideal for:
Individual stocks you plan to hold for more than one year Individual stocks you plan to hold one year or less
Tax-managed stock funds, index funds, exchange-traded funds (ETFs), low-turnover stock funds Actively managed funds that may generate significant short-term capital gains
Stocks or mutual funds that pay qualified dividends Taxable bond funds, zero-coupon bonds, inflation-protected bonds or high-yield bond funds
Municipal bonds, I bonds Real estate investment trusts
Disclosure
*Such as Roth IRAs and tax-deferred accounts including traditional IRAs, 401(k)s and deferred annuities.
Of course, this presumes that you hold investments in both types of accounts. If all your investment money is in your 401(k) or IRA, then just focus on picking appropriate investments and allocating to them according to your goals, risk tolerance and timeframe.
Diversifying by tax treatment
Holding your investments in the most tax-appropriate type of account can complement your savings plans by helping to reduce taxes (or, in the case of a Roth, eliminate entirely the taxes on investment returns). But note that if you take a distribution of Roth IRA earnings before you reach age 59½ or before the account is five years old, the earnings may be subject to taxes and penalties. Spreading your investments across accounts with different tax treatments can also give you more flexibility in managing your taxes when you start drawing from your savings in retirement. You might think of this as “tax diversification.”
Diversifying by tax treatment can be especially important if you’re uncertain about the tax bracket you’ll end up in in retirement. For example, by investing in a taxable brokerage account and then splitting your retirement-savings contributions between a tax-deferred IRA or 401(k) and an after-tax Roth account, you would have more options for managing your income in retirement, regardless of your tax bracket.
So if your goal is to minimize your overall tax burden, you could focus on taking tax-free municipal bond income, qualified dividends, and long-term capital gains (which currently tend to be taxed at lower rates) from your taxable accounts and drawing tax-free income from your Roth accounts. Then you could take only enough money from your taxable IRA or 401(k) to cover your spending needs or satisfy required minimum distributions, if applicable.
Of course, this is just one approach. Some investors may prefer to rely on their taxable and tax-deferred accounts (along with Social Security and pensions) for income and allow their tax-free Roth savings to continue growing for as long as possible.
Estate planning, charitable giving considerations
Making strategic use of your different accounts according to their tax treatment can also help you formulate your charitable giving and estate planning goals—different accounts receive different types of gift and estate tax treatment. For example, you might want to give appreciated securities held long-term from your taxable accounts to charity for a full fair market value deduction and no capital gains tax.
You can also leave such shares to your heirs, who will receive a step-up in cost basis after you’re gone (more on that below). Roth IRAs also make a great bequest, as distributions are free from income tax for your beneficiaries.
How to think about your total portfolio
No matter how you decide to split up your portfolio between account types, remember that for asset allocation purposes, you should still think of all your investments as being part of a single portfolio.
Here’s a simplified illustration: If you kept all your stocks in your taxable account and an equal amount of money in bonds in your tax-advantaged account, that would not constitute two portfolios, one 100% stocks and the other 100% bonds. You would actually have one portfolio consisting of 50% stocks and 50% bonds. The different assets just happen to be in different accounts.
Other tax-related investment considerations
In general, holding tax-efficient investments in taxable accounts and less tax-efficient investments in tax-advantaged accounts should have potential to add value over time. However, there are other factors to consider, including:
– There are tax implications to periodically rebalancing your portfolio to maintain your target asset allocation. Rebalancing involves selling and buying assets that have either grown beyond or fallen below your original allocation. When you take profits from your winners and buy assets that have underperformed, it could cause an additional tax drag on returns in your taxable accounts. When you sell an investment in a taxable account you may incur either long- or short-term capital gains. Therefore, you may want to focus your rebalancing efforts on your tax-advantaged accounts and include your taxable accounts only when necessary. Adding new money to underweighted asset classes is also a tax-efficient way to help keep your portfolio allocation in balance.
– Active trading by individual investors or by a mutual fund manager, if successful, tends to be less tax-efficient and better suited for tax-advantaged accounts. A caveat: Realized losses in your tax-advantaged accounts can’t be used to offset realized gains on your tax return through a process known as “tax loss harvesting.”
– A preference for income might prompt you to hold bonds in taxable accounts, even if it makes more sense from a tax perspective to hold them in tax-advantaged accounts. In other situations, it may be impractical to implement all of your portfolio’s fixed income allocation using taxable bonds in tax-advantaged accounts. If so, compare the after-tax return on taxable bonds to the tax-exempt return on municipal bonds to see which makes the most sense on an after-tax basis.
– Estate planning issues and philanthropic intent might play a role in your portfolio planning. If you’re thinking about leaving stocks to your heirs, stocks in taxable accounts are generally preferable. That’s because the cost basis is calculated based on the market value of the stocks at the time of death (rather than at the time they were originally acquired, when they may have been worth substantially less). In contrast, stocks in tax-deferred accounts don’t receive this treatment since distributions are taxed as ordinary income anyway. Additionally, highly appreciated stocks held in taxable accounts for more than a year might be well-suited for charitable giving because you’ll get a bigger deduction. The charity also gets a bigger donation than if you liquidate the stock and pay long-term capital gains tax before donating the proceeds.
– The Roth IRA might be an exception to the general rules of thumb discussed above. Because qualified distributions are tax free, assets you believe will have the greatest potential for higher return are best placed inside a Roth IRA, when possible. Assets in these account can be a good way to pass on assets to your heirs.
Keep more of your money with tax-efficient investments
If you want to keep more of your returns, managing your investments with tax efficiency in mind is a must. What’s more, tax efficient investing techniques are accessible to almost everyone—it just takes some up-front planning to reap the potential benefits.
