Effects of Increasing Interest Rates on the California Housing Market

Mortgage rates are expected to stay high despite the recent pause by the Federal Reserve on interest rate hikes.

While this may benefit fixed-income funds in California, it poses a setback for affordable housing in the state, according to Fiona Ma, the California state treasurer, who expressed her views during the CNBC Financial Advisor Summit. 

The Federal Reserve announced on Wednesday that it would maintain steady interest rates in June, after implementing ten rate increases since March 2022. The committee projects two quarter-point interest rate hikes later this year.

In the state of California, where the cost of living is high, Fiona Ma continues to prioritize affordable housing and savings programs.

“Ensuring that my agencies are proactive has been crucial,” Ma emphasized.

The rise in interest rates has had a significant impact on the real estate market, making it increasingly difficult for individuals to afford homeownership. In an effort to alleviate this issue, Fiona Ma introduced a program called “Dream for All” on March 27. The program provided down payment assistance to eligible first-time homebuyers in California. However, due to overwhelming demand, the program had to be closed after just two weeks.

“There is still a strong demand for homeownership, and I believe that once we can lower interest rates again, the real estate market will once again thrive,” Ma stated.