Thursday, February 19, 2026

Housing Improves on Paper as California Realtors Warn Economy’s Strength Masks Deeper Strains

By EDDIE RIVERA

For an economy that refuses to break, the latest numbers offer a peculiar kind of reassurance: things are getting better, except where they aren’t.

A new report from the California Association of Realtors (CAR) paints a portrait of a U.S. economy that appears resilient in headline indicators—steady job growth, moderating inflation and slightly improved housing affordability—but remains stubbornly fragile beneath the surface, weighed down by weak consumer spending, rising uncertainty among small businesses and borrowing costs that remain punishingly high by historical standards.

The contradictions are everywhere.

The labor market delivered a stronger-than-expected showing in January, with employers adding only 130,000 jobs and unemployment falling to 4.3%, neither of which is a particularly strong number. Inflation, meanwhile, has cooled, with the consumer price index rising 2.4% over the past year and core inflation slowing to 2.5%, its best reading in nearly six years.

Yet the apparent progress has not translated into widespread economic relief. Retail sales were flat in December, signaling consumers are increasingly cautious despite steady employment. Small business optimism, while still above its long-term average, slipped as uncertainty rose sharply, and more owners reported insurance costs and economic unpredictability as their most pressing concerns.

In housing, the changes are modest and hard-won. California’s housing affordability index edged up to 18% in the fourth quarter, meaning fewer than one in five households could afford the median-priced home. Monthly mortgage payments declined about 4% from a year earlier, helped by easing—but still elevated—mortgage rates.

Even that modest improvement reflects less a surge in prosperity than a slight easing of financial pressures the CAR report noted.

Mortgage rates have fallen to a three-year low, offering relief to buyers and helping stabilize affordability. But borrowing costs remain high relative to the ultra-low rates that defined much of the previous decade, and homeownership remains out of reach for most Californians.

Behind the mixed signals lies a broader economic reality shaped in part by policy uncertainty.

Financial markets have reacted favorably to signs that the Federal Reserve may hold rates steady in the coming months, with potential cuts later this year if conditions weaken. But the Fed’s caution reflects the uncertain trajectory of an economy influenced not just by inflation and employment, but by erratic fiscal signals, shifting trade policies and inconsistent economic messaging from Washington.

Those policy swings have contributed to an environment in which businesses hesitate to invest and consumers hesitate to spend, even as aggregate economic data suggests stability.

Wage growth has kept pace with inflation, rising 3.7% over the past year, but key costs—including housing, insurance, medical care and durable goods—remain stubbornly elevated. Shelter costs alone rose 3% over the past year, continuing to strain household budgets.

The result is an economy that resists easy classification. It is neither booming nor collapsing, but instead stuck in an uneasy equilibrium, supported by employment but constrained by affordability and uncertainty.

For California’s housing market, and for the broader economy, the outlook depends heavily on whether borrowing costs continue to ease and whether policy stability returns. Until then, improvement will likely remain incremental—visible in statistical releases, but less apparent in daily life.

The economy, in other words, is holding up. But it is not moving forward with conviction.