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

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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.

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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.

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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.

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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%.

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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.

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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.

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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

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Why Southern California’s most vulnerable youths face hunger during school holidays

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Why Southern California’s most vulnerable youths face hunger during school holidays


The holidays are a time when people gather with loved ones and celebrate abundance, but when California’s most vulnerable young people aren’t going to school because they are on break, it means even more uncertainty over where to find food. And that leads to even greater risk.

That’s the finding of a coalition of Orange County nonprofits that is tracking 500 at-risk youths to better understand what they need to live more stable lives and steer clear of abusive situations.

The collaboration uses a new tool for digital case management, research and prevention, developed by EverFree, which supports human trafficking survivors, in partnership with UC Irvine. It allows the nonprofits to collect information from young people, ranging from those in elementary or middle school to 24-year-olds.

Almost half the students tracked with the digital tool, who were referred by social-work case managers, said they aren’t living a healthy lifestyle, the nonprofits said. One in 5 said they often don’t know how they’ll eat and one-third said they struggle with mental and emotional well-being.

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All of the participants come from families that are either unhoused, living in temporary housing such as motels or sharing crowded dwellings with multiple, unrelated families, said Shelby Feliciano-Sabala, a social worker who is chief partnership officer at Project Hope Alliance, a nonprofit that helps children experiencing homeless. The organization is working on the project with EverFree and Stand Up for Kids Orange County.

School can be much more than a place to learn, Feliciano-Sabala said.

“Youth experiencing homelessness get a sense of belonging, safety and routine when they’re at school,” she said. “When you don’t have that routine, and you don’t have access to that food, that disrupts your regular life.”

When already-vulnerable youths undergo even more uncertainty about getting food, there is often someone waiting to exploit that situation by luring them into coerced labor and sex work or subjecting them to gender-based violence, said Kelsey Morgan, co-founder and chief executive officer of EverFree.

“We’ve heard stories from many of our other partners of youth who run away and are approached by a trafficker who simply offers a McDonald’s cheeseburger,” Morgan said.

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Feliciano-Sabala said she’s heard of traffickers winning over young people with a gift as meager as a bag of Takis rolled tortilla chips.

“Food insecurity is actually resulting in runaway situations where kids are so desperate that any person willing to offer them something small is winning their trust,” she said.

Feliciano-Sabala said private nonprofits represent “critical infrastructure” all year round, but particularly during the holidays, when the need tends to spike.

For families living in their cars, for instance, her nonprofit distributes gift cards to restaurants where they can eat in more comfort and safety, she said. Families staying in hotels with nowhere to cook can receive prepared food such as turkeys and tamales. Her nonprofit also distributes food from its small pantry or buys groceries for families in need.

Inadequate food is an ongoing problem for young people and families across California and the U.S., and it’s not only school-age children who are at risk.

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One in 4 college students nationwide has an unreliable food situation, according to an analysis by the nonpartisan U.S. Government Accountability Office, which provides fact-based information to Congress. However, most of those who are potentially eligible are not enrolled in the federal Supplemental Nutrition Assistance Program — or SNAP — the GAO found.

Congress passed a law in 2024 designed to raise enrollment in federal food-aid among students by giving the U.S. Department of Education the authority to share student data with both federal and state SNAP agencies to determine their eligibility. But in a report this year, the GAO said that the department still had not made a plan to share this data, or given states guidance about the benefits of the law.

Self-assessments completed by young people ages 18-24 in Orange County as part of the nonprofits’ data collection mirror the food-access concerns that young adults across the country report. The research shows about half go to an institution of higher learning full-time, a third go to school and work part-time and the rest work full-time. So even though they have income, many are worrying about food, Morgan said.

In fact, getting enough to eat ranked higher than adequate clothing and safe, stable housing among college-age students who shared their top priorities ahead of the holiday season in 2024, she said. The nonprofits plan to release more insights about youths they’re tracking in 2026.

“When you look to the data of what these youth are asking for, it sheds a lot of light on what those core vulnerabilities are,” Morgan said. “These are individuals who want, desperately, dignified employment. They’re prioritizing things like savings, household income, money management, skills for employment and healthy lifestyles.”

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Feliciano-Sabala said the digital tool was developed in response to the desire among case workers to offer help that is more tailored to those in their care.

The nonprofits hope to share their findings with service providers and policymakers to better address what young people say about their lives and dreams.



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Letters to the Editor: Small pieces of trash litter California’s beaches — and even those harm animals

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Letters to the Editor: Small pieces of trash litter California’s beaches — and even those harm animals


To the editor: It is horrible that even very small pieces of plastic trash harm marine animals (“How little plastic does it take to kill marine animals? Scientists have answers,” Nov. 17). Having picked up trash at Oceano Beach and Pismo Beach for years, I’ve seen flattened mylar balloons (in the most remote places), ubiquitous cigarette butts, toothpick wrappings, plastic grocery bags, bottle caps, degraded plastics of beach toys and Styrofoam. These items are easily found in kelp piles, along with white foam beads and hard plastics in a variety of colors.

I am grateful to the SeaVenture Beach Hotel for holding monthly Pismo Beach cleanups and to Taylor Lane of the Cigarette Surfboard” documentary, who has made it a cause to stop plastic pollution.

Mark Skinner, Los Osos

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California labor leader pleads not guilty to obstructing federal officers during immigration raid

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California labor leader pleads not guilty to obstructing federal officers during immigration raid


Union leader David Huerta pleaded not guilty Tuesday to a misdemeanor charge of obstruction of justice related to a confrontation with immigration officials during a raid this summer.

Huerta, the 58-year-old president of the Service Employees International Union California — a group that represents healthcare, property service and public sector employees — was detained by federal agents and hospitalized June 6 while documenting one of the first in a string of immigration raids that roiled the region over the summer. He was released on his personal recognizance and was told to remain at least 100 feet away from federal officers.

After his arraignment, Huerta spoke to reporters, union members and supporters, blasting the charges filed against him.

“These charges are baseless, they are attempting to silence anyone who dares to speak out, organize or demand justice,” Huerta said. “I will continue to stand with you until every worker and every family is safe from raids, separation and fear and our constitutional rights are protected.”

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Chants of “¡Si se puede!” erupted from the small crowd.

In a video of the incident obtained by TV station KPIX, Huerta can be seen at a warehouse in downtown Los Angeles verbally confronting federal agents with his hands at his hips before being shoved to the ground and promptly taken into custody, hoisted by the back collar of his shirt.

According to the original federal criminal complaint, Huerta was allegedly witnessed “taunting” and “yelling” at federal enforcement officers as they attempted to execute criminal search warrants of four businesses in the downtown area accused of “unlawfully employing illegal aliens.” The complaint alleged that Huerta also attempted to block federal enforcement vehicles from exiting or entering a clothing wholesale business parking and compelled other protesters to sit in front of the vehicle exit.

After his arrest, prosecutors said they originally planned to charge Huerta with a federal felony offense of conspiracy to impede an officer, which can carry a maximum six-year sentence. He was released soon after on a $50,000 bond.

Huerta’s attorney, Marilyn Bednarski, said after the press conference that the charges were downgraded from a felony to a misdemeanor, she believes, due to a lack of solid evidence.

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The detainment spawned an intense reaction from immigrant and labor activists, becoming a flash point early in the protests around California. The National Guard was deployed to Los Angeles days later, leading to additional unrest across the city.

“This administration has turned the military against our own people, terrorizing entire communities, and even detaining U.S. citizens who are exercising their constitutional rights to speak out,” SEIU Workers West, a subdivision of the union, said in a press release. “

Top Democratic leaders also criticized federal officers for their treatment of Huerta during and after the arrest, including California Sens. Adam Schiff and Alex Padilla, Senate Minority Leader Chuck Schumer (D-N.Y.) and Gov. Gavin Newsom.

“David Huerta is a respected leader, a patriot and an advocate for working people,” Newsom said in a statement at the time. “No one should ever be harmed for witnessing government action.”

The U.S. Attorney Office for the Central District of California announced last month that 10 additional individuals had been federally charged and arrested on complaints of violence against officers and property during immigration protests. The office is also seeking federal charges against one individual in state custody and another who has yet to be arrested.

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“Acts of violence against the brave law enforcement officers who protect us are an attack on civilized society itself,” U.S. Atty. Gen. Pam Bondi said in a press release. “As today’s arrests and charges illustrate, anyone who engages in such disgusting conduct will face severe consequences from this Department of Justice.”

Huerta’s trial is scheduled to begin Jan. 20, 2026.



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