Thursday, September 10, 2026

California Housing Faces Mixed Signals as Rates Climb Back Toward 7%

By EDDIE RIVERA

California Housing Faces Mixed Signals as Rates Climb Back Toward 7%

A resilient labor market is colliding with rising borrowing costs and mounting household financial strain, leaving California’s housing market in an uncertain holding pattern, according to a new report from the California Association of Realtors.

Mortgage rates have pushed back toward the 7% threshold in recent weeks, driven by renewed tensions in the Middle East and climbing energy prices that have rattled bond markets, the report found. Mortgage News Daily data cited in the analysis show top-tier 30-year fixed rates entering the upper-6% range, with many borrowers now facing rates at or above 7% — largely erasing gains made earlier in the spring homebuying season.

The rate pressure is already showing up in construction figures. Census Bureau data referenced in the report indicate private residential construction spending fell 1.3% in July from the prior month and dropped 7.3% from a year earlier — the fourth straight monthly decline. Single-family spending was hit hardest, down 3.2% month-over-month and 6.5% annually, while multifamily building showed only marginal movement.

Labor data, meanwhile, painted a more encouraging picture. Employers added 162,000 jobs in August, well above consensus forecasts and the strongest monthly gain in five months, according to figures cited from the Bureau of Labor Statistics, with unemployment holding at 4.1%. Revisions added a combined 55,000 jobs to June and July’s totals. Still, wage growth of 3.1% annually continued to trail inflation, which ran at 3.4% in July — a gap the report says is squeezing household budgets even as hiring holds up.

That solid jobs report, however, may complicate the Federal Reserve’s rate path. The report notes markets have raised expectations for a quarter-point hike at the Fed’s September meeting, with next week’s inflation data likely to weigh heavily on the decision.

Household balance sheets showed a similar split. The New York Fed’s latest household debt data, cited in the report, show overall delinquency rates ticking down to 4.7% and seriously delinquent mortgage balances falling to just under 1% — signs of limited mortgage distress. But credit-card balances climbed to $1.26 trillion, with roughly 13% of balances seriously delinquent, underscoring persistent strain for many households.

For California, the report concludes the net effect is a market propped up by stable employment and low mortgage distress, but constrained by affordability challenges that could keep a lid on sales activity in the months ahead.