California consumers are feeling slightly better about the economy this month, but the improvement is a low bar. According to the California Association of Realtors, the broader housing and economic picture remains far weaker than it was before the Iran conflict began, continuing the nation’s economic slow drift since January.
The University of Michigan’s Consumer Sentiment Index rose to 49.5 in June, up from a record low of 44.8 in May. Economist Joanne Hsu, who directs the survey, said consumers welcomed a recent drop in gas prices. Even so, the index sits 13 percent below where it stood in February, before the conflict started, and nearly 20 percent below a year ago. Hsu noted the reading remains the second lowest recorded since the late 1970s.
Inflation continues to outweigh other concerns for consumers. At the start of the year, 23 percent named inflation as the greater economic threat. That number has climbed to 36 percent, the highest share since February 2025. For a third consecutive month, more than half of those surveyed said high prices are weighing down their household finances.
Household finances did register some relief. Current financial assessments rose 9 percent, and expectations for the year ahead rose 15 percent. Hsu attributed both gains largely to softening gas prices rather than any broader turnaround. The benefit has also been uneven. Nearly 28 percent of consumers with the largest stock holdings cited rising asset values as a boost to their finances. Among those with the smallest holdings, only 4 percent said the same.
Housing affordability in California and across the West has shown little relative change. New single family home sales nationwide fell 7.3 percent in May to a seasonally adjusted annual rate of 580,000, missing expectations and marking a second straight monthly decline. The West posted the steepest drop of any U.S. region, down 17 percent from May 2025, according to the data cited by the California Association of Realtors. Builder inventory has grown as well, with months of supply rising to 10.3, up from 9.3 in April.
The Realtors’ report noted that elevated mortgage rates and cost of living pressures will likely continue weighing on the market through the rest of the year, with any improvement expected to be gradual rather than a genuine recovery.
Attitudes toward buying have not collapsed entirely. A separate Bank of America report found 53 percent of Americans now favor buying a home over renting or living with family, up from 48 percent last year. Expensive home prices and elevated interest rates remain the top reasons cited for delaying a purchase, at 58 percent and 47 percent respectively.
Hsu said sentiment should see moderate improvement in the second half of 2026, but only if inflation continues to ease and uncertainty tied to the conflict subsides. Until then, she said, the recent gains amount to relief from a low point rather than a return to prior strength.
