California’s notoriously tight housing market offered a flicker of relief in the first quarter of the year, with home affordability inching upward even as broader economic uncertainties—including international trade tensions and fluctuating mortgage rates—continued to loom.
According to the California Association of Realtors, the state’s housing affordability index rose by two points to 17%, marking a modest improvement from the fourth quarter of 2024. That figure remains historically low—meaning fewer than one in five households can afford a median-priced single-family home—but it is a welcome sign for buyers after months of stagnation.
The median home price continued its slow upward trend, while average monthly mortgage payments dropped slightly by 1.8% quarter-over-quarter, thanks in part to seasonal adjustments and minor income gains. Still, year-over-year payments rose 4.6%, underscoring how far out of reach homeownership remains for many Californians.
Mortgage rates—already elevated—climbed to their highest level in three quarters, driven by growing unease over national and global economic signals. “Borrowing costs remain near their all-time highs,” the California Association of Realtors report said, noting that rates may continue to seesaw as the economic picture develops in the coming months.
Adding to the murkiness is the volatile sentiment among would-be buyers.
Fannie Mae’s Home Purchase Sentiment Index, which tracks consumer attitudes around housing, ticked up slightly in April after plunging to a 15-month low in March. Just 23% of respondents said it was a good time to buy, while the share who thought it was a good time to sell dropped to 58%, a 16-month low. Nearly one-third of Americans said they expect their personal finances to worsen over the next year.
Much of the anxiety is linked to international trade developments. Over the weekend, the United States and China agreed to reduce tariffs on each other’s goods for 90 days—an apparent de-escalation of a drawn-out trade dispute that had rattled global markets. Under the new deal, the U.S. will lower its average tariffs on Chinese goods to 30%, while China will reduce tariffs on U.S. imports to 10%, down from 125%.
The breakthrough, reached during a two-day meeting in Geneva, sparked a strong reaction on Wall Street. The S&P 500 surged 3.26% on Monday, and the U.S. dollar strengthened. Bond yields jumped as recession fears momentarily eased, pushing mortgage rates higher as a result.
Despite the optimism, the Federal Reserve decided to hold interest rates steady in its May meeting, keeping the benchmark rate at 4.25% to 4.50%. Fed Chair Jerome Powell signaled caution, noting that risks of both inflation and job losses remain elevated. “It is appropriate to wait and see how things evolve,” Powell said.
Back in California, real estate professionals are finding ways to gain an edge in an unpredictable market. A new report from the National Association of Realtors showed that staging continues to make a measurable difference: 29% of agents said it led to higher offers, and nearly half reported that it cut time on the market. Living rooms and primary bedrooms are seen as the most important areas to stage.
With economic pressures mounting and housing sentiment still subdued, many Californians may find themselves in wait-and-see mode heading into summer.
