California’s recovery is losing altitude this fall, with a weakening housing pulse, rising property-insurance costs and renewed trade uncertainty dampening consumer and business sentiment, according to new data from the California Association of Realtors (CAR) and other indicators.
In September, home-buying sentiment was flat despite lower mortgage rates early in the month. CAR, citing Fannie Mae’s Home Purchase Sentiment Index, said the index held at 71.4, unchanged from August and 2.5 points below a year earlier. According to Fannie Mae, fewer consumers saw it as a good time to buy or sell, while more expected mortgage rates to rise in the next 12 months—signs the state’s largest sector remains stuck in low gear. Affordability faces another headwind: the state’s last-resort home insurer is seeking a steep rate increase.
The California FAIR Plan has also requested an average 35.8% premium hike—its largest in years—as private carriers retreat from high-risk areas, CAR reported. If approved, the move would land hardest on households already strained by prices and insurance scarcity in fire-prone regions, raising entry costs for buyers and carrying knock-on effects for listings and mobility.
Policy crosswinds add to the drag. Financial markets have been rattled by President Trump’s threat of 100% tariffs on Chinese imports starting Nov. 1, a response to Beijing’s tighter controls on rare-earth exports. Tariff uncertainty typically curbs the appetite for risk and raises input costs for California’s trade-exposed firms in logistics, electronics and consumer goods, potentially pressuring hiring and investment through year-end, according to a recent report from CBS News.
Households are already turning more cautious. The New York Fed’s Survey of Consumer Expectations for September showed the perceived probability of job loss ticking up and expected earnings growth slipping to 2.4%, the lowest since April 2021. Consumers also nudged down their one-year financial outlooks—behavior that tends to restrain discretionary spending and home purchases, according to the Federal Reserve Bank of New York.
Stress is visible at the margins of housing credit. Data provider ATTOM reported 35,602 U.S. properties with foreclosure filings in September, down 0.3% from August but up 20% from last year, as California ranked 12th-highest among states by foreclosure rate. While activity remains below pre-pandemic levels, a cooling job market and higher carrying costs could push delinquencies higher into 2026, a risk for the state’s most vulnerable borrowers, said ATTOM.
Together, the indicators sketch a picture of a state economy idling below potential. CAR’s read is that sentiment is stuck as buyers face a three-part squeeze—payment affordability after 2022–24 price gains, insurance availability and cost, and broader macro volatility. Even a modest rate dip hasn’t moved the needle, suggesting that policy uncertainty, rather than rates alone, is holding back demand. That uncertainty, says Fannie Mae, now spans fiscal negotiations in Washington, trade policy and the regulatory response to California’s insurance crunch—variables that businesses and households can’t easily price.
Meanwhile, economists say stabilization hinges on clarity. A durable easing in mortgage rates, a regulatory pathway that coaxes private insurers back into the market, and a de-escalation of tariff risks could help thaw transactions and unlock supply from “rate-locked” owners. Otherwise, the CAR report noted, California’s housing engine—long the state’s business-cycle amplifier—looks set to contribute less to growth this winter than in prior recoveries, keeping the broader economy on a slower track.
