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

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

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.

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. 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.

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%. 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.

Nederland Laatste Nieuws, Nederland Headlines

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