A dip in mortgage rates pushed more homeowners to make a move in the second quarter – often to refinance rather than purchase.
Lenders approved about 1.76 million mortgage-related loas during the April-June period, a 19.4% increase from the first quarter and up 6.3% from a year ago, according to ATTOM Data. But more than half of those loans were of the refinance or home-equity line of credit variety.
Many homeowners were attempting to curb debt or fund a home-improvement project rather than purchase another home, according to the quarterly report. Mortgages to buy a home were off 5% compared to a year ago.
“Mortgage activity perked up a bit in the second quarter, but it’s not a clear signal that the market has turned a corner,” said Rob Barber, CEO at ATTOM.
‘A TYPICAL SPRING BOUNCE, NOT YET A BREAKOUT’
In California, refinancing and home-equity lines of credit also dominated what was a better but still slow mortgage activity.
Eight of the nine regions enjoyed increases in home loans – all three types – with only Bakersfield mortgages slipping from a year ago (see table, below).
“The increase in purchase and refinance activity reflects some buyer and homeowner response to marginal rate improvements, but underlying affordability and economic uncertainty continue to hold the market in check,” Barber said. “This was a typical spring bounce, not yet a breakout.”
6.5% RATES MAY NOT MOVE THE NEEDLE – OR HOMES
Lower mortgage rates could help during the next few months, especially if the Federal Reserve moves forward on a bump or two lower. A dip in mortgage rates have helped make homes more affordable, but home prices are more of a concern than rates, housing experts say.
“Affordability conditions have now improved for two consecutive months, the result of lower mortgage rates and continued strong income growth,” said Edward Seiler, the Mortgage Bankers Association’s associate vice president of housing economics and executive director of the Research Institute for Housing America. “MBA is forecasting that mortgage rates will remain in the 6.5% to 7% range for the rest of 2025. While still elevated, continued income growth and softening home-price gains should boost prospective buyers’ purchasing power in the months ahead.”
Maybe, but others say mortgage rates will need to drop below 6.25% to have a huge impact on the sluggish housing market.
Fewer than one of every five households in California could afford to buy the median-priced home during the second quarter, largely because of the price rather than rates, according to the California Association of Realtors.
But every dollar matters, and some agents say even a $100 drop could help open the door to homeownership, especially for entry-level buyers.
“Encouragingly, mortgage rates have recently declined to their lowest level since last October, and that has already led to an increase in purchase applications,” said CAR president Heather Ozur.
Mortgages increase in Q2, but many were refis
| City | Mortgages issued | Year over year |
|---|---|---|
| Bakersfield | 4,009 | -6.5% |
| Fresno | 4,184 | 15.9% |
| Los Angeles | 45,991 | +14.8% |
| Riverside | 23,737 | +3.0% |
| Sacramento | 12,494 | +3.3% |
| San Diego | 14,837 | +15.7% |
| San Francisco | 18,040 | +17.7% |
| San Jose | 7,777 | +24.0% |
| Santa Rosa | 2,255 | +11.5% |
Source: ATTOM Data
Foreign buyers are back after several years. But they are a smaller percentage of the market than a decade ago. ADOBE STOCK
Foreign-born buyers are back, thanks to a stronger pound, ruble and yen
Despite immigration raids and ongoing threats from the White House, more foreigners are looking for just the right house in the U.S. – and often in California.
And while many Americans – and Californians – cannot afford a home, foreigners are enjoying some more buying power, thanks to a weaker U.S. dollar, according to Redfin.
Economic uncertainty and mounting U.S. debt has weakened the dollar, but helped European, Japanese and even Russian buyers in the U.S. Buyers from across the pond, the Pacific Ocean and Russia are enjoying a 5% to 10% discount, thanks to Uncle Sam.
“Some foreign buyers may be considering stepping back into the market now because their currencies have gained ground against the dollar,” said Chen Zhan, head of economic research for Redfin. “Their money simply goes further than it did a year ago. It’s like getting a discount that domestic buyers can’t access.”
BOOST IN FOREIGN-BORN BUYERS, BUT FAR FROM THE 2010s
In countries closely connected to the U.S. dollar – think Canada, Mexico, China and India – the buying power has weakened during the past year, according to Redfin. So, many of those buyers are holding off from purchasing in the U.S.
Foreign-born buyers purchased 78,100 homes in the U.S. between April 2004 and March 2025, a 44% increase compared to a year earlier, according to the National Association of Realtors. It was the first annual boost since 2017 but was the second-lowest figure in 16 years.
Better but not great.
FOREIGN-BORN ASIANS BUY THE MOST HOMES IN CALIFORNIA
California had the second-most homes sold to foreign-born buyers at 15%, compared to 21% in Florida. Texas had the third-most sales at 10%.
But California was the destination of choice for Chinese-born buyers. The Golden State was the second most-popular destination for buyers from India and Mexico.
Asian buyers accounted for almost three of every five homes (57%) sold to foreign-born folks in California, followed by buyers from Latin America at 18% and Europeans and Africans at 9%.
Where foreign-born buyers are from in California
| Continent | % of buyers |
|---|---|
| Asia | 57% |
| Latin America | 18% |
| Europe | 9% |
| North America | 9% |
| Africa | 8% |
Source: National Association of Realtors
Investors own 19% of single-family homes in California, but probably not where you think. SHUTTERSTOCK
Home investors think small to generate big returns
Investors have been aggressively buying homes in California for almost two decades, entering the market full force when prices were cut in half with the housing crisis during the Great Recession.
Investors – many are mom-and-pop buyers – own almost one of every five (19%) homes, or about 1.44 million, in California, the second-most behind only Texas, according to BatchData.
And the buying binge won’t likely change anytime soon.
Investors bought almost 27% of the homes sold during the second quarter, the highest percentage in the past five years, according to BatchData. But it’s worth noting that the increase is largely because there were fewer buyers overall in the April-June period.
THE BOOMING INVESTOR MARKET OF SIERRA COUNTY
So, where do investors dominate the market? Los Angeles, San Francisco or Santa Barbara?
Nope, think smaller. Really small.
Like some of the tiniest counties, where home prices – and household incomes – are smaller. Much smaller.
Investors own more than four of every five (82%) of homes in Sierra County, a pint-sized county in Northern California. There are fewer than 1,600 homes in Sierra County.
Three of every four homes are owned by investors in Trinity (77%) and Mono (74%) counties. Investors own more than half of the homes in Alpine, Plumas, Modoc and Calaveras counties.
In higher-priced and larger-population counties — such as the Bay Area, Los Angeles and San Diego – investors own about one of every eight (mid-teen percentage) homes.
More than 776,000 homes are needed in the six largest cities in California. SHUTTERSTOCK
Home construction is better, but far from what is needed
California’s critical housing shortage has become worse in recent years, missing a hard-to-meet goal outlined by the governor and state lawmakers.
The state needs at least 2.5 million and as many as 3.5 million homes – apartments to single-family homes – but construction has failed to keep pace, according to multiple reports. Basically, California needs almost as many additional homes as the population of Los Angeles.
Zillow has determined that California’s six-largest cities (see table, below) alone need a combined 776,400 more homes to meet the demand, based on 2023 data. That’s almost as many homes as the population of San Francisco.
MIXED RESULTS
Some of these cities, like Sacramento and San Francisco, are cutting into their deficits. But others, most notably Los Angeles and Riverside, are missing the mark.
So, as families grow, more homes are needed. A lot more.
Now, construction has improved in recent years, but is nowhere near the 200,000-plus homes completed in 2004 and 2005, before the housing market collapsed, according to the U.S. Census Bureau. Construction has been about 110,000 units annually during the past decade.
| City | Deficit of homes in 2023 |
|---|---|
| Los Angeles | 338,750 |
| San Francisco | 139,900 |
| San Diego | 95,831 |
| Riverside | 85,087 |
| Sacramento | 60,431 |
| San Jose | 56,378 |
Source: Zillow
‘HASN’T YET BEGUN TO CLOSE THE GAP’
So far, California has about 102,000 homes under construction for the first seven months of 2025, according to the National Association of Home Builders based on Census Bureau data.
Nationwide, more than 4.7 million more homes are needed to meet the demand.
“The unfortunate fact is that we still don’t have enough housing in this country for people who need it,” said Orphe Divounguy, senior economist at Zillow. “Construction has helped prevent the housing deficit from ballooning, but it hasn’t yet begun to close the gap. We know what works: lower building restraints to allow for more density and less expensive housing. More of these measures at the local level can help get more homes built and begin to ease this outsize financial burden for millions of Americans.”
