Forget all the ballot initiatives aimed at helping wannabe homebuyers.<\/p>\n
Ignore what the Federal Reserve may or may not be doing.<\/p>\n
A more lasting fix for frustrated California house hunters would be falling home prices, as they clearly are balking at homebuying, with statewide sales running near the Great Recession\u2019s lowest levels.<\/p>\n
The only good news for those hoping to join California\u2019s ownership class is that mid-year pricing is at its weakest in nearly three years, my trusty spreadsheet says. Yet that came before the housing market was hit once again with 7% mortgage rates.<\/p>\n
California home prices gained only 0.9% in the 12 months through June, according to a curious home price index from the Federal Housing Finance Agency<\/a> that tracks the prices of more affordable homes, using purchase and refinancing application data.<\/p>\n How slow is that? It\u2019s the third-worst performance among the states, and it trails the state\u2019s historical average gain of 6.3% in data dating back to 1975.<\/p>\n It\u2019s also the Golden State\u2019s smallest price gain since the third quarter of 2023. Curiously, that summer saw the average 30-year mortgage rate top 7% for the first time since 2001.<\/p>\n Elsewhere<\/p>\n It\u2019s no California quirk. Nationally, prices rose just 3% in the past year.<\/p>\n That\u2019s a noteworthy weak gain, as it was the smallest one-year advance in this U.S. index since the first quarter of 2013. Yes, the worst in 13 years.<\/p>\n Note that since 1975, U.S. home prices have averaged 5% annual gains.<\/p>\n Also, at mid-year 2026, one-year home price gains in 10 states were at their lowest levels in at least 10 years.<\/p>\n By the way, California\u2019s economic rivals slumped, too. Texas home price gains were seventh-weakest at 1.6%, and Florida ranked eighth-weakest at 1.4%.<\/p>\n What\u2019s down?<\/p>\n These chilled gains are signs the market may finally be acknowledging the huge shortage of buyers who can afford today\u2019s overpriced housing.<\/p>\n Additionally, elevated mortgage rates don\u2019t create more house hunters. Nor do a wobbly job market and global instability.<\/p>\n Renting, for all its challenges, looks far more affordable.<\/p>\n And, to investors, a hot stock market makes homes look like a poor bet.<\/p>\n Shrinking profits<\/p>\n Let\u2019s politely say that a lot has changed in the housing market since the Federal Reserve ended its cheap-money policies years ago.<\/p>\n For home prices, every state has seen smaller gains from 2022 through mid-year 2026 than in the previous four years, according to FHFA indexes.<\/p>\n California home prices have averaged annual increases of 1.9% since 2022. That was the seventh-smallest increase among the states and trailed the nation\u2019s 3.1% annual rate of gains.<\/p>\n Hey, Texas gains were the fourth-slowest at 1.5% per year, while Florida ranked sixth-slowest at 1.6%.<\/p>\n Even the nation\u2019s fastest gains seem mild: New Jersey was up 5.6% annually since 2022, Connecticut 5.4% and New York 5.2%.<\/p>\n The boom years<\/p>\n Now, stack those small gains against the previous four years, when pandemic-era economic chaos and rock-bottom mortgage rates sent prices soaring.<\/p>\n California home prices surged at an annual rate of 9.5% over the four years ending in the second quarter of 2022. That sizeable jump was the 11th-smallest gain among the states, as U.S. prices rose at an 11.3% annual rate.<\/p>\n The top gains were seen in Idaho, which averaged 16.5% annual increases. Florida was at 15.1% and Arizona at 14.6%. Texas was No. 19 at 11.5%<\/p>\n How hot was it? Even the slow spots for appreciation saw noteworthy gains: the District of Columbia averaged 4.6% per year, Louisiana 6.4% and North Dakota 6.7%.<\/p>\n Leader to laggard<\/p>\n California home gains have mellowed to a back-of-the-pack position among the states.<\/p>\n That\u2019s bad for bragging rights. It\u2019s better for affordability. And it\u2019s a huge status change.<\/p>\n Think about the period between 1975, when the FHFA data starts, and 2018. That\u2019s when today\u2019s affordability problems were created, as California home values appreciated at an annual rate of 7.5%. That gain was No. 1 among the states and well above the nation\u2019s 5.9% annual pace.<\/p>\n Yes, California was once America\u2019s home appreciation king in an era when the state economy grew at top-of-the-charts speed.<\/p>\n Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com<\/a><\/p>\n Try Jonathan Lansner\u2019s Substack collection of economic trends. CLICK HERE<\/a>!<\/p>\n August\u2019s most popular Southern California real estate stories \u2026<\/p>\n No. 1: Where is OC\u2019s hottest homebuying neighborhood? <\/a><\/p>\n No. 2: 338-unit affordable housing complex breaks ground in Tustin <\/a><\/p>\n No. 3: Peek inside this Newport Coast estate that sold for $39M <\/a><\/p>\n No. 4: Enderle Center sold, Campo on 17th moves ahead in Tustin <\/a><\/p>\n No. 5: Rents rise in just 22% of SoCal. See which cities got hikes <\/a><\/p>\n No. 6: Home prices dip in 38% of OC. How did your ZIP do? <\/a><\/p>\n No. 7: LA-OC\u2019s worst-paying jobs: Can those wages pay the rent? <\/a><\/p>\n No. 8: LA-OC homes still \u2018unaffordable\u2019 even with a 0% mortgage <\/a><\/p>\n No. 9: Corona del Mar retail center trades hands, a first in 80 years <\/a><\/p>\n