A small rate improvement met a cautious housing market

Last week delivered modest mortgage-rate relief, softer home-contract activity, mixed construction data, and a clearer look at California’s July housing market. The reports do not describe a market in crisis. They describe a market where affordability continues to control the pace.

Buyers are still purchasing, but fewer are willing—or able—to stretch beyond a comfortable payment. Sellers can still succeed, but pricing and presentation must reflect what buyers can finance today.

Mortgage rates declined for a second week

The average 30-year fixed mortgage rate declined from 6.67% to 6.65% as of August 20. The 15-year average slipped from 5.96% to 5.95%. The 30-year rate was still above the 6.58% average recorded one year earlier, according to
Freddie Mac.

Two basis points will not transform affordability, but a second consecutive decline is welcome after rates moved higher during July. Remember that Freddie Mac reports a national average—not the rate every borrower will receive. Credit, down payment, loan program, points, lender pricing, property type, and assistance programs all affect an individual quote.

Mortgage rates also do not move in lockstep with the Federal Reserve’s policy rate. They respond to longer-term Treasury yields, inflation expectations, economic growth, market risk, and demand for mortgage-backed securities. One favorable report can help sentiment without determining the next rate move.

Pending sales show how payment-sensitive buyers remain

National pending home sales declined 2.3% from June and 2.2% from July 2025, reaching their lowest level since January. The West recorded the sharpest regional decline: contracts fell 4.7% monthly and 7.1% annually, according to the
National Association of REALTORS®.

Pending sales normally lead closed-sale data by one or two months. July’s decline therefore suggests that late-summer closings may remain restrained. It does not mean every community or price range will behave the same way. Local inventory, condition, insurance costs, taxes, and financing options still determine how an individual property performs.

California sales softened while Riverside prices increased

California existing single-family home sales fell 6% from June but remained 1.1% above July 2025. The statewide median price declined 1.9% monthly to $887,680 and was only 0.3% higher annually. Inventory increased from 3.1 to 3.4 months, although it remained below the 3.7 months available one year earlier.

Riverside County’s median single-family price reached $649,000—up 2.2% from June and 3% annually. Sales declined 13.7% monthly and 2.6% from one year earlier. Across the Inland Empire, the median price was $600,000, up 1.9% annually, while sales fell 1.5%. These figures come from the
California Association of REALTORS®.

A median is the midpoint of homes sold, not an appraisal of every property. Still, rising Riverside prices alongside slower sales tell us something important: buyers are selective, and fewer transactions are carrying the market. Sellers should not assume that a countywide price increase guarantees a specific result.

Builders received mixed signals

July housing starts declined 12.4% to a seasonally adjusted annual rate of 1.239 million. Single-family starts fell an estimated 9.9%, although that monthly estimate had a wide margin of error. At the same time, total building permits increased 5%, and single-family permits rose 2.5%, according to the
U.S. Census Bureau.

Starts describe construction getting underway; permits help indicate the future pipeline. The combination suggests that builders slowed current activity but have not abandoned future development. In Menifee, Winchester, and other growing Inland Empire communities, buyers should continue comparing builder incentives with resale homes. Include Mello-Roos, HOA dues, upgrades, insurance, taxes, and the permanent loan terms—not just the advertised payment.

Employment remains stable, including in California

Initial unemployment claims declined by 6,000 to 206,000 for the week ending August 15. Continuing claims increased to 1.799 million, while the insured unemployment rate remained 1.2%, according to the
U.S. Department of Labor.

California’s unemployment rate improved from 5.2% in June to 5.1% in July and was below the 5.5% recorded a year earlier, according to the
Bureau of Labor Statistics. Employment conditions are not booming, but the latest readings do not show widespread job losses. That supports housing demand while also reducing the case for immediate, aggressive interest-rate relief.

The Fed remains focused on inflation

Minutes from the Federal Reserve’s July 28–29 meeting showed that most participants supported keeping the federal funds target at 3.50%–3.75%, while several favored a quarter-point increase. Policymakers generally described the labor market as stable, but many remained concerned that inflation could stay elevated longer than expected. The minutes also noted that home-purchase mortgage activity remained depressed.

The
Federal Reserve minutes
reflect the information available at that meeting, so they are not a live forecast. They do show why markets should not assume quick policy easing.

No new Consumer Price Index, Producer Price Index, or retail-sales report was released during the August 17–23 week. The latest July data remain the relevant backdrop: consumer inflation rose 0.1% monthly and 3.4% annually; producer prices were unchanged monthly but 4.7% higher annually; and retail sales declined 0.6% monthly while remaining 5% above the prior year.