So many reasons to stay put: What’s behind California’s frozen housing market?

Prices and interest rates have stalled out at unaffordable highs, keeping buyers at bay. Sellers, unable to fetch the still-higher prices they want, are backing out of the market in droves. The result is a housing market stuck in molasses, with a slow down in new listings, stagnant sales and an uptick in deals cancelled at the last minute.

If the country as a whole is in the middle of a housing market drought, conditions look especially parched in California.

New homes listed for sale fell by more than 17% in San Francisco, compared to the same time last year, according to online real estate broker Redfin. There were double-digit year-over-year declines in listings in San Diego, Riverside, Anaheim too. Of the 10 metros where new listings fell fastest, five were in California.

“The number of transactions have absolutely slowed down,” said Amy Kong, a real estate agent who works in and around San Francisco. “As everyone knows, it’s because of the higher interest rates and the affordability, which is just really, really low.”

Part of the market slow down can be blamed on a nationwide financial pathology that dates back half a decade, said Daryl Fairweather, Redfin’s chief economist. As mortgage borrowing costs have whipsawed from ultra-low to harrowingly high over the last five years, the gap between what most current homeowners pay for their mortgage and what they would pay if they were to borrow and buy again is historically wide. That makes this an inauspicious time for most homeowners to sell.

But as with so many of the nation’s housing woes, things are even worse in California thanks to the specific “dysfunctions” of our market and the particularities of our property tax system that date back to the 1970s, said Fairweather.

Taken all together, California homeowners “have extra reasons to stay put,” she said.

That means fewer opportunities for aspiring homeowners, more pressure on the rental market as discouraged would-be buyers find themselves shunted there and prices that are likely to remain persistently high, despite high interest rates meant to cool things off.

California’s housing market has been in a kind of holding pattern for years, said Oscar Wei, economist with the California Association of Realtors. “I thought by now we would see sales coming back up a little bit more,” he said.

Unanswered questions about the future of the economy, tariffs and what they might mean for inflation, the stock market and how all of the above will influence interest rates are likely holding both buyers and sellers back, he explained.

And then there’s the persistent borrowing cost gap, which economists dub the “lock-in effect.”

In an effort to jump-start an economy that had ground to a halt during the early days of the COVID-19 pandemic, the Federal Reserve brought borrowing rates down to near-zero. Homebuyers tapped those low rates to buy homes. Existing homeowners scrambled to refinance to lower their costs.

Two and a half years later and facing the new crisis of rapidly rising prices, the Fed jacked borrowing costs back up. For homeowners who took out fixed-rate mortgages (most do) when borrowing costs were low, the sudden rate bounce made selling a home with plans to buy a new one — and in the process losing the coveted low rate in exchange for a high one — a losing financial proposition.

An analysis by economists at the Federal Housing Finance Agency found that the majority of borrowers in mid-2024 had a rate below 4%. A typical new mortgage, on the other hand, is likely to come with a rate of more than 6.5%.

That difference comes with a steep financial price tag. If the average mortgage payer were to swap out their existing loan for one at the new rate, they would pay another $398 per month, the agency researchers estimated.

The effect is even more pronounced in California, where property values are particularly high. The median sales price on a single family home across the state is just shy of $900,000, according to the state association of Realtors.

A typical California borrower would pay an extra $675 every month if they were to take on the same mortgage at current rates, according to the Federal Housing Finance Agency report. In San Francisco, it’s an extra $915. That’s a compelling reason not to sell.

Since 1979, when the prior year’s Proposition 13 went into effect, property taxes in California have been tied to the purchase price of a home and only allowed to increase at a modest rate. With real estate prices across the state trending upward ever since, that’s created yet another kind of “lock-in effect:” The longer that a person owns a home, the less they pay in property taxes compared to a new buyer. A recent analysis by the Lincoln Institute of Land Policy estimated that new buyers can expect to pay more than twice as much in property taxes compared to a typical long-time homeowner in many of California’s largest cities, including Los Angeles, San Diego, Long Beach, Oakland and Sacramento.

“When people are doing the math about how much money it would cost them to move and they look at the mortgage expense, and then on top of that, the property tax expense, it’s not worth it,” said Fairweather.

Absent an influx of new listings, aspiring homeowners looking for the opportunity to buy will need to wait on new construction to deliver. But new supply has essentially flatlined over the last decade, despite a bevy of state legislation aimed at boosting more development. Fairweather said she isn’t optimistic that that’s likely to change soon — and the lock-in effect on property owners is one reason why.

“I’m skeptical that owners of single-family homes are going to give up the land to actually build enough housing to make a difference,” she said. “It’s good that all those laws change, but I feel like they might be muted in their impact because of all the other forces that are pointing towards single-family neighborhoods staying exactly the same.”

The housing market.

Slow because everyone got out of ****holes and sold high. There is no one willing to buy high there anymore.

This problem will take care of itself in 10 to 15 years.

Boomers mostly dead.

Illegals all gone.

Plenty of houses.

The thing that is most problematic about the housing crisis and makes me think its all a manufactured crisis is this:

In Obama terms department of housing had a msndate to have each zip code reflect the population heterogeneity. Tell more

During the Obama administration, the Department of Housing and Urban Development (HUD) implemented a policy known as Affirmatively Furthering Fair Housing (AFFH), introduced in 2015 under the Fair Housing Act of 1968. While it did not explicitly mandate that each ZIP code must reflect the exact population heterogeneity of the broader region, the AFFH rule aimed to address systemic segregation and promote more integrated and equitable communities across the United States. The policy was rooted in the idea that historical patterns of racial and economic segregation, often reinforced by local zoning laws and housing policies, limited opportunities for minority and low-income populations.Key Aspects of the AFFH Rule:Purpose and Intent:The AFFH rule required local governments and public housing authorities receiving HUD funding to proactively analyze and address patterns of segregation, discriminatory practices, and disparities in access to opportunity (e.g., quality schools, jobs, transportation).
It sought to “deconcentrate poverty” and reduce racial and ethnic disparities in housing by encouraging communities to diversify their neighborhoods, particularly in affluent or predominantly white areas. HUD emphasized that a person’s ZIP code should not determine their life outcomes, as stated by then-HUD Secretary Julián Castro: “Where a child grows up should not dictate where they end up.”

Implementation:Jurisdictions were required to submit an Assessment of Fair Housing (AFH), which involved analyzing local data on housing patterns, segregation, and access to resources. This included examining ZIP code-level demographics to identify areas of racial or economic concentration.
Communities had to set goals to address these disparities, such as building affordable housing in “high-opportunity” areas (often wealthier, less diverse neighborhoods) or improving infrastructure in underserved areas.
HUD provided tools like demographic mapping and data sets, including ZIP code population-weighted centroids, to help jurisdictions assess local housing patterns.

Failure to comply could jeopardize federal funding, though the rule was not about forcing specific demographic quotas in every ZIP code but rather about reducing barriers to fair housing choice.

“Small Area Fair Market Rents” and Diversity Mapping:One notable regulatory change under HUD Secretary Julián Castro was the Small Area Fair Market Rents (SAFMR) policy, which used ZIP code-level data to set voucher payment standards for the Section 8 Housing Choice Voucher program. This aimed to enable low-income families, often minorities, to access housing in higher-opportunity, less segregated neighborhoods rather than being concentrated in poorer areas.
Critics on X described this as “diversity mapping,” claiming it targeted “too white” neighborhoods for integration by incentivizing Section 8 tenants to move there. However, HUD framed it as expanding housing choice and breaking cycles of poverty.

Philosophical Underpinning:The Obama-era HUD viewed residential segregation as a product of historical discrimination, including redlining, restrictive covenants, and exclusionary zoning. The AFFH rule assumed that racially or economically homogeneous ZIP codes often reflected these systemic issues rather than purely individual preferences.
The policy challenged the notion that low-income or minority neighborhoods inherently offered fewer opportunities, advocating for both integration into wealthier areas and revitalization of underserved communities.

Controversies and Criticisms:Supporters:Civil rights advocates, like the National Fair Housing Alliance, argued the rule was essential to combat the “legacy of segregation” and create “healthy, vibrant places” for low-income and minority families.

Proponents saw it as a way to fulfill the Fair Housing Act’s mandate to not only prevent discrimination but also actively promote integration.

Opponents:Critics, including some Republicans and conservative commentators, labeled the AFFH rule as “social engineering.” They argued it overreached by pressuring local governments to alter zoning laws or build affordable housing in affluent suburbs, potentially disrupting community character.

Figures like Rep. Paul Gosar (R-AZ) claimed it could “break up the core fabric” of communities and make residents feel uncomfortable.

Posts on X during 2025 echoed these sentiments, alleging the rule “weaponized” Section 8 vouchers to “flood” white suburbs with low-income tenants, framing it as a deliberate attempt to alter demographics.
Some argued it diverted resources from revitalizing poor neighborhoods to subsidizing housing in wealthier areas, potentially harming existing low-income communities.

Legal and Political Pushback:The Trump administration suspended the AFFH rule in 2018 and revoked it in 2020, with HUD Secretary Ben Carson calling it “unworkable” and a burden on localities. They replaced it with a less stringent rule focused on reducing regulatory oversight and emphasizing local control.

In 2023, the Biden administration proposed reinstating a revised AFFH rule, simplifying the process but maintaining the focus on equity plans to combat segregation.

Legal challenges, including lawsuits from civil rights groups like the ACLU and NAACP, arose when the Trump administration rolled back the rule, highlighting its contentious nature.

Misconceptions:The AFFH rule did not mandate that every ZIP code mirror the exact demographic makeup of a region. Instead, it required jurisdictions to identify and address barriers to fair housing, which could involve reducing segregation but not enforcing strict quotas.
Claims on X that the rule forced “racial imbalances” to be corrected in every ZIP code oversimplify the policy, which was more about expanding opportunity than mandating demographic uniformity.

Impact and Legacy:The AFFH rule’s implementation was limited due to its suspension in 2018, so its long-term effects are unclear. However, pilot programs showed some success in enabling low-income families to access better neighborhoods through vouchers.

The policy sparked a broader debate about the role of federal government in local housing decisions, the persistence of segregation, and the balance between integration and community autonomy.
Data from HUD, such as ZIP code population-weighted centroids, continues to be used for spatial analysis in housing policy, reflecting the ongoing relevance of geographic disparities.

Sources:City Journal, “A Better Approach to Fair Housing” (2019)

AP News, “HUD revokes Obama-era rule designed to diversify the suburbs” (2020)

The Hill, “New Obama housing rules target segregated neighborhoods” (2015)

HUD.gov, ZIP Code Population Weighted Centroids dataset

Posts on X reflecting public sentiment (2025)

If you’d like me to dig deeper into specific aspects, such as the data tools HUD used or the legal battles, let me know!

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