California's housing market reacts variably to mortgage rate changes. Lower rates can lead to increased home sales, with a 5% average gain during significant rate drops since 1990. Nevertheless, sales fell in 34% of analyzed periods despite dropping rates. Conversely, statewide home prices typically rose 4% during rate declines but increased at a more significant 7% rate when rates escalated. The Federal Reserve's cautious stance on rate cuts, influenced by trade tensions and inflation fears, complicates predictions of market behavior with changing rates.
The historical perspective suggests that cheaper money is not a perfect cure for housing affordability issues. Bargain financing often coincides with economic disarray.
When rates drop, house hunters get busy, with single-family home sales averaging a 5% gain during the biggest rate cuts since 1990.
Despite rate drops typically encouraging homebuying, sales declined in 34% of the analyzed 12-month periods even when rates fell significantly.
The statewide median home price rose an average of 4% when rates tumbled since 1990, but it outpaced at 7% annually when rates increased.
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