October 13, 2025 – Home buying sentiment remained unchanged in September, despite falling interest rates in the first half of the month. Economic uncertainty and the labor market weakness are couple factors that contributed to the lack of optimism in the housing market. With the government shutdown stretching into its second full week and the trade tension between the U.S. and China intensifying in the past few days, consumer confidence could deteriorate, and the pessimism could spill over to the housing market if the situations linger on.

Home Purchase Sentiment moves sideways in September: Despite falling mortgage rates in the first half of the month, the September’s Home Purchase Sentiment Index (HPSI) was unchanged from the prior month, according to the latest Fannie Mae’s release. Last month’s HPSI of 71.4 remained the same as that in August but was 2.5 points below the year-ago level. Consumers who believed that now is a good time to buy inched down to 27% from 28% in the prior month, and those who believed now is a good time to sell also dipped month-over-month by 1 point to 57%. Their outlook on housing affordability over the next 12 months also appeared to be less optimistic, as 30% of respondents expected mortgage rates to climb – an increase from 26% in August, while 40% of them continued to believe that home prices will go up in the next 12 months. The share of employed consumers who said that they were concerned about losing their job in the next 12 months, however, improved slightly with a decline from 27% in August to 25% in September. With the labor market showing signs of weaknesses in recent months, job loss concerns could heat up again in coming months and could have an adverse effect on the sentiment index in the near term.

California FAIR Plan asks for sharp rate hike: The California FAIR Plan, the state’s insurer of last resort for homeowners unable to secure private insurance coverage, has requested a sharp premium rate hike averaging 35.8% starting next spring, marking its largest proposed increase in over seven years. The rate increase would vary between individual homeowners, with about half of all policy holders seeing rate hikes of 40% to 55%, while some would experience a decrease. If approved, the average rate hike would be higher than the increase of 20.3% in 2019 and nearly 16% in 2021 and 2023. The proposal is under review by Insurance Commissioner Ricardo Lara, who previously scaled back similar requests. With the plan’s portfolio ballooning to nearly 591,000 policies as private insurers retreat from high-risk areas, the hike could severely impact affordability and create more financial challenges for current homeowners and incoming homebuyers.

Massive increase in China tariffs rattle markets: President Trump announced in a post on Truth Social that a new round of tariffs on Chinese imports, including a proposed 100% duty, will be implemented starting on November 1, 2025. The president said that the move was in response to new controls that China imposed on exports of rare earths minerals. The latest tariffs announcement disrupted financial markets last Friday, with the S&P 500 and Nasdaq posting their worst single-day decline since April. Bonds rallied as the stock market sank, with the 10-year Treasury yield down near nine basis points on Friday and the average 30-year fixed rate dipping six basis points, according to Mortgage News Daily. China vowed to stand firm against the tariff threat but emphasized that it does not want a trade war. It would take corresponding measures though if the U.S. proceeds with the tariff hike. With gold prices surging and the dollar weakening after the president’s announcement, financial markets will likely remain volatile this week.

Labor market expectations deteriorate as earning growth slips: Results from the New York Fed’s Survey of Consumer Expectations indicate that consumers’ optimism on the labor market continued to decline last month, while their expectations on household financial situation remained broadly unchanged. The likelihood of losing one’s job in the next 12 months increased by 0.4 percentage points to 14.9% in September, but the odds of finding a job in the next three months if one’s current job was lost rebounded from the series low of 44.9% in August to 47.4% in September. Meanwhile, respondents expected their earnings 12 months from now to grow by 2.4%, reaching the lowest level since April 2021 after a dip of 0.1 percentage point from August. While more households believed their current financial situations were better off compared to a year ago, fewer of them expected their financial situations to get better a year from now, as the share who believed their household finance will improve declined to 27.9% in September from 29.3% in August.

Foreclosure activity continues to rise annually in September: Foreclosure filings on U.S. properties declined on a month-over-month basis last month but increased for the seventh straight month year-over-year, as private data suggests that the job market has weakened further. According to ATTOM, there were a total of 35,602 U.S. properties with foreclosure filings in September, a decrease of 0.3% from August 2025 but a jump of 20% from September 2024. At the national level, one in every 3,997 housing units had a foreclosure filing in September 2025. Statewide, California had one foreclosure in every 3,514 homes and was ranked the 12^th highest in foreclosure rates among all states. Lakeland-Winter Haven in Florida was the metro with the highest foreclosure rate in the U.S. and Bakersfield in California had the highest rate in the state. Despite the increase from last year, overall foreclosure activity levels remain below those seen before the pandemic. With the economy expected to slow in the next couple quarters, more homeowners will likely experience added financial strain which could result in higher foreclosure rates in the next 12 months.

Note: This summary report gets updated every Monday by 6:00 pm PST. Feel free to email us at [email protected] if you have any questions and/or feedback.