Connect with us

California

Are cheaper mortgages bad news for California’s housing market?

Published

on

Are cheaper mortgages bad news for California’s housing market?


Falling mortgage rates should come with a warning label stating: “Be careful what you wish for!”

This summer’s cheaper home loans ignited real estate buzz suggesting California’s two-year homebuying slump may be nearing its end.

The Federal Reserve’s lengthy battle against inflation – fueled by higher interest rates – helped make California homebuying nearly impossible for most house hunters. But mid-2024’s moderating cost of living, plus overall economic lethargy, has already trimmed mortgage rates off 20-year highs. Come September, the Fed is expected to begin cutting its benchmark rates.

Advertisement

Yes, lower rates mildly prune California’s huge affordability challenges. Some industry insiders even speculate these savings could create a rush to buy, forcing California prices even higher.

But the same cheaper mortgages that lead to a “buy now” narrative are often signals of economic trouble. Remember, interest rates typically fall when the business climate cools.

By the numbers

To contemplate the mix of rates and pricing, I filled my trusty spreadsheet with these stats dating to 1977: the average 30-year mortgage from Freddie Mac, California home price data from the Federal Housing Finance Agency, and what you may think is an odd number: the state’s unemployment rate from the Bureau of Labor Statistics.

Consider what we learn when slicing history into 12-month periods, simply based on whether mortgage rates got pricier or cheaper over the past 47 years.

When mortgage rates grew over a year’s time, California home prices averaged 10%-a-year gains.

Advertisement

Then look at what happens when mortgage rates fell. California prices gained only 4.4% on average. Yes, less than half.

Now, let’s not blindly cheer rising rates. Think about a theoretical buyer’s house payment using math that combines these pricing patterns and rate swings.

When rates rise over a year, estimated California house payments jumped 21% on average. Pricier homes plus pricier loans is a painful bite to the wallet. But buyers seem willing to pay up.

Conversely, payments in times of falling rates dropped by 2.6% a year on average. So it’s the cheaper money that creates whatever meager affordability exists in California.

Now, these results may seem illogical as pictured through a traditional real estate lens. But take a broader view of the economy and ponder the cyclical health of California’s job market.

Advertisement

When mortgage rates rose during the past half century, the statewide unemployment was falling by 0.7 percentage points per year on average. Basically, interest rates rise when times are good and bosses are hiring.

Unfortunately, when the economy gets too hot – such we saw in 2021 to 2023 – the bond market and/or the Fed may play Grinch, pushing up interest rates, and spoiling the economic party.

Contrast that pattern to how the economy performs when loan rates decline during the past half century: California joblessness was increasing by 0.3 percentage points. So fewer jobs, less demand for all sorts of goods and services – and a Fed more willing to help.

Bottom line

Don’t overthink housing’s sometimes myopic data. It’s really about real estate’s three pillars: “Jobs. Jobs. Jobs.”

In the past 47 years, when jobs are scarce and unemployment rises in a year, California home prices average 2% gains. When unemployment drops, prices rise 9%.

Advertisement

Please note that California joblessness has been above 5% for 10 months, after reaching an all-time low of 3.8% in August 2022.

You see, successful house hunting requires not only a paycheck – but confidence that you’ll remain employed. And cheaper mortgages frequently come with a weaker business climate and depressed consumer confidence.

That can make California house hunters think twice about paying top dollar for housing. It’s a key reason why you see weaker pricing when rates are down.

Of course, every cycle is different. Maybe the odd post-pandemic real estate market will act unlike the statistical norms shown by this math.

Ponder history’s extremes. Prices jumped 29% with lower rates in the year ended in September 2004. But cheaper mortgages did not prevent a 23% drop in the 12 months ended September 2008.

Advertisement

So summer 2024 might be a “buy now” moment with tumbling rates helping to push California home prices skyward. But the true catalyst would be an economy that nails an Olympic-quality soft landing with few job losses.

My spreadsheet also tells me that since 1977 when mortgages got cheaper in a year, California home prices rose 67% of the time. Not bad odds.

But when rates were rising, price gains came 85% of the time.

Postscript

The economic fallout of cheaper mortgages has modestly varied in the past half century, depending on the size of the rate drops. Ponder these California examples of one-year dips …

Rates down half-percentage-point or more: Home prices rose 3.6% in 12 months on average in these situations. Again, a weak economy, as California’s unemployment rate averaged a 0.9-point increase in a year.

Advertisement

Off three-quarters-point or more: Prices up 2.5%. Unemployment up 1.1 points.

Off 1 point or more: Prices rise 4.2%. Unemployment up 0.6 points.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

Originally Published:



Source link

Advertisement

California

Bug infestation found at California Department of Education headquarters, employees sent home

Published

on

Bug infestation found at California Department of Education headquarters, employees sent home


Bugs have once again been found inside the California Department of Education headquarters in downtown Sacramento, prompting employees to leave the building and raising concerns among workers about returning to the office.

Employees were instructed to go home after bugs were detected in the building, according to state workers and union representatives.

They say it’s not the first time. Union representatives and employees confirmed to CBS News Sacramento that this is the second bug-related incident at the headquarters in the past two years.

“If they’re in one place, it’s very easy for them to be throughout the entire building,” said Anica Walls, president of SEIU Local 100.

Advertisement

The discovery has renewed concerns about workplace safety, particularly as state employees prepare for expanded return-to-office requirements.

“Let’s do what’s necessary and make sure that our employees stay safe and that when they are in the building, they’re not contracting or taking home anything that they don’t need to be,” Walls said.

The California Department of Education confirmed the building experienced a bed bug incident in 2024. However, officials said they are still awaiting pest control reports to determine whether the insects recently discovered are bed bugs or another species.

State workers say they want a permanent solution rather than temporary fixes.

“It’s smart to fix the problem the correct way rather than trying to just mitigate the issue and shut down certain floors,” Walls said.

Advertisement

While most state agencies are scheduled to move to a four-day-a-week, in-office schedule beginning next week, California Department of Education employees will continue their current hybrid schedule of two in-office days per week through the end of the year.

In a statement, the department said it is working with the Department of General Services and pest control specialists to inspect the entire building.

“As stated in the message to our employees, we are actively coordinating follow-up inspections and remediation efforts and will provide updates as soon as additional information becomes available,” the department said.

Union representatives said the department was responsive during the previous infestation and expressed hope for a quicker resolution this time.

“Last time, they were really receptive to the conversations with employees, which was good. We’re hoping for another good outcome, hopefully just a little more expedient this time,” Walls said.

Advertisement

CBS News Sacramento also spoke with a local pest control company, which said that if the insects are confirmed to be bed bugs, treatment could take several months.

The process typically involves repeated inspections and treatments every one to two weeks, including high-heat treatments reaching approximately 160 degrees and extensive cleaning to prevent the infestation from returning.



Source link

Continue Reading

California

First look: Space Shuttle Endeavour in ready-to-launch position at California Science Center

Published

on

First look: Space Shuttle Endeavour in ready-to-launch position at California Science Center


This fall, space fans will get to see the Space Shuttle Endeavour like never before in its new permanent home at the California Science Center in the Exposition Park area. 

What we know:

Advertisement

The new Samuel Oschin Air and Space Center at the California Science Center officially opens on November 13. 

Also, an introductory film includes footage from Endeavour’s final launch before being retired in 2011. 

“We felt from the beginning this is the most impressive way to see the space shuttle and it gives people views that almost no one ever got a chance to see,” said Jeff Rudolph, President & CEO of the California Science Center. 

Advertisement

What they’re saying:

Since 2012, Los Angeles has been home to the Space Shuttle Endeavour. It has been on display horizontally at the California Science Center.  

Advertisement

But the vision was always to have it on display upright

“It’s really exciting and everyone who sees it is in awe and that’s really what we were trying to do was create that real sense of emotional high and inspire people to learn more,” said Rudolph. 

This is the only display of its kind and it can’t be duplicated. The orange tank attached to the shuttle is the last mission-ready one in existence. 

Advertisement

“I think what we’ve done is present something that is going to be a truly life-changing and transformative experience for education,” said Kenneth Phillips, Curator for Aerospace Sciences at the California Science Center. 

Visitors will also be able to see inside the space craft that carried astronauts to space 25 times, including Mae Jemison, the first Black woman to go to space and now-Arizona Senator Mark Kelly.  

Advertisement

When the exhibit opens to the public in November, visitors will be able to ride up an elevator alongside the space shuttle and view it from the top. 

“That’s the view that nobody but the crew saw. That was a very special vantage point. Nobody got to do that,” said Phillips. 

What’s next:

Advertisement

The California Science Center expects the exhibit to be popular. Tickets will go on sale well before the opening. 

ScienceAir and SpaceExposition Park



Source link

Advertisement
Continue Reading

California

5.6 earthquake strikes near Ukiah, triggers alerts across Northern California

Published

on

5.6 earthquake strikes near Ukiah, triggers alerts across Northern California


A 5.6 magnitude earthquake shook Northern California on Wednesday morning, according to the U.S. Geological Survey.

The quake was centered 7 miles north of Redwood Valley in Mendocino County, north of Ukiah, and east of Highway 101. It had a depth of 5.0 miles.

A ShakeAlert notification went off on many people’s phones moments before the earthquake hit at 8:10 a.m., initially forecasted as a 6.1 magnitude quake by the U.S. Geological Survey (USGS) and downgraded moments later.

People across Northern California felt the quake. Reports came in from as far away as Eureka, Redding, Sacramento, and the Bay Area. Most people reported light to moderate rolling and shaking.

Advertisement

Since the initial quake, several aftershocks have hit the same area. Three smaller quakes between 2.6-2.7 magnitude were detected in the same area between 8:17 a.m. and 9:06 a.m., and are expected to continue.

So far, there have not been any reports of major damage or injuries.

Comment with Bubbles

BE THE FIRST TO COMMENT

Advertisement

Report a correction or typo.



Source link

Continue Reading
Advertisement

Trending