This is CalMatters housing reporter Ben Christopher hitting on Lane.
There’s something strange going on in California’s housing market.
If you’ve recently bought a home in this state — or if you’ve thought about buying one, looked at your local listings, then deleted the Zillow app from your phone while quietly crying — you’ve probably noticed that interest rates are high these days.
In fact, the interest rate on a typical 30-year mortgage rose 8% on Wednesday, according to tracking site Mortgage Daily News. Weekly data from Freddie Mac show that home borrowing rates are now higher than they have been in at least two decades.
This is thanks almost entirely to the action of the US Federal Reserve, which has raised the cost of borrowing in an attempt to rein in inflation.
The way it’s supposed to work follows two steps:
- The first step: Rising prices make borrowing money for large purchases and investments less attractive for people.
- The second step: A decrease in the number of people wanting to buy things causes sellers to lower prices.
A new report released Wednesday from the California Association of Realtors shows the state’s housing market is seeing that first step in a big way as sales continue to collapse.
But the second step? We are still waiting.
The number of homes sold in September of this year was down 21.5% from the previous year, according to a Realtors report.
But despite the drop in demand, California’s high housing prices haven’t budged much. Statewide, they are up about 3% compared to last year.
What’s the deal?
I asked Oscar Wei, deputy chief economist at the Realtors Association, who explained that the housing sector can play by its own economic rules. This is because, unlike people selling new cars, clothes, or groceries, someone selling a home is often in the market to buy one. And they don’t like these high rates either.
- Wei :”Three years ago, many of the current homeowners at the time were investing at a rate of let’s say, three percent… Now, when people look at the rate, it’s seven percent. Even if they were originally planning to move, they may not necessarily want to do so now.
To put this in Econ 101 terms, high borrowing rates not only cool demand, putting downward pressure on prices, they simultaneously restrict supply, boosting prices again. The net effect: higher prices combined with ever-higher prices, pricing out more ambitious first-time buyers.
High rates could also make it very difficult for state lawmakers to combat California’s housing shortage in the long term. Last week, Gov. Gavin Newsom signed 56 bills aimed at speeding up construction in an effort to address California’s chronic housing shortage.
But cutting red tape only goes so far. People in the home building business work with borrowed money.
Hence the result of a National Association of Home Builders poll this week, which found that rising rates have home builders feeling particularly gloomy these days. This is especially true for those in western states, including California.
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Other stories you should know
Test results remain in the post-pandemic slump
The pandemic may be officially over, but here’s another example of how the shadow of COVID-19 continues to loom over the state: student test results.
The California Department of Education released a set of new numbers. As CalMatters education reporter Carolyn Jones and data reporter Erica Yee explain: “Scores have remained mostly stagnant in the past year and remain well below pre-coronavirus levels.”
This is despite billions of dollars in state and federal spending aimed at helping children catch up after pandemic-era school closures.
- Linda Darling HammondChairman of the State Board of Education: “We are not where we want to be. We have a long way to go, but we are making progress.”
But this progress is very modest:
- The number of students meeting math standards has increased since last year, but by just over one percentage point;
- In fact, those meeting English language arts standards dropped slightly.
One explanation for why these numbers refuse to budge: Public schools have seen an uptick in the percentage of students from low-income families and those experiencing homelessness.
Which brings us to another example of Covid’s ongoing effects in California: As many state and federal pandemic relief programs neared their end, the poverty rate rose across California last year.
Discussing BS in California
Environmental regulators, farmers, fuel producers and environmental activists in California are locked in a heated debate over cow poop.
That’s because the California Air Resources Board may soon eliminate government subsidies for dairies that capture methane gas emitted by cow and pig manure.
As Alejandro Lazo, environment reporter at CalMatters, explains, it’s a dilemma that reflects California’s changing priorities when it comes to tackling climate change.
- Providing “methane avoidance” credits was once considered a smart way to reduce the dairy industry’s emissions: methane is emitted by about 1.7 million cows, accounting for about 6% of greenhouse gas emissions attributable to the industry Agriculture in California.
- But those credits have given rise to California’s biogas industry, whose same product (“renewable” gas) powers another product that regulators hope to soon phase out (cars with internal combustion engines).
Read Alejandro’s story for a deeper dive into this surprisingly complex debate — but also for his description of the Tulare County dairy digester, a thick-skinned black balloon inflating above a fertilizer lake the size of a football field.
Walking on it seemed like “stepping into a bounce house at a kid’s birthday party.”
A “correct” solution to homelessness?
It’s a small solution to California’s biggest problem.
“Tiny homes,” which are less than 400 square feet and often lack a kitchen or bathroom, have become an increasingly popular way for local and state officials to provide shelter to Californians experiencing homelessness.
They may be here to stay, writes CalMatters’ Jane Kuang. This is partly because, between cheap but crude group shelter arrangements and comfortable but slow and expensive affordable housing projects, these model homes occupy a sweet gold-plated niche.
- San Jose Mayor Matt Mahan: “They are the best solution we have to the crisis on our streets.”
Some advocates Jane spoke to — including a tiny home builder — worry that focusing on tiny homes as a solution to the state’s homelessness crisis could detract support and funding from longer-term solutions, like permanent supportive housing.
- Amy KingCEO of Pallet Shelter: “I am not in favor of this type of housing becoming a substitute for permanent housing.”
One of the state’s biggest boosters of tiny homes: Gov. Newsom. Earlier this year, he said his administration would send 1,200 units across the state.
When can cities expect the first deliveries? The state is still working on that.
Other things worth your time:
Some stories may require a subscription to read.
Senator Butler’s lucrative work after Confederation It included a US$1 million payout to Airbnb // Politico
State fines on Long Beach hotel $4.8 million For not rehiring workers after Covid // Los Angeles Times
TV presenter Cristina Pascucci He’s running for U.S. Senate in California // POLITICO
CA fights no-kill animal shelters With a high rate of pet euthanasia // Sacramento Bee
Suzanne Somers’ legacy is tainted By Celebrity Medical Misinformation // California Healthline
Citrus disease is moving north March worries valley farmers // Bakersfield CA
Will El Niño return? Does this mean the winter of 2023 will be more humid? //KQED