August 12th, 2025 3:22 PM by Gregg Mower
As I write this article, I currently have a home listed for sale out of my portfolio, and it is not being shown even though it falls into the affordability range for a normal wage earner in California which is a $399,000 sale price. You will need to make upwards of $10,000 a month in income to qualify for this house, and a 3% down is $12,000, which does not include closing costs. The mortgage payment would be around $3,000 a month. You would need to make upwards of $8,000 a month or right about $100,000 a year to qualify for this starter home. If you are wondering why Real Estate sales are slow, this is a perfect example.
So how do you fix this situation? It will not be an easy fix, but first, the interest rates must move down. However, Jerome Powell, who is the head of the Federal Reserve, just said they are not lowering interest rates, so the economy will continue to falter. I truly believe that we are currently in a recession, but the numbers being reported by the Bureau of Labor Statistics are stating otherwise, and those are the numbers the Fed goes by when making interest rate decisions. I truly believe that something is amiss, and we the people are not being told the truth, neither are the President and his advisors, and they all go off the same numbers to make economic decisions. Apparently, they figured this out, and President Trump just fired the head of the BLS. The problem now is how to fix the damage that has been done.
Aside from the bad numbers being reported, there is real trouble in California and other states with getting Insurance for houses. With all the wildfires in California, Insurance companies have left the state as the state legislature has not allowed private insurance companies to raise their rates to cover the losses. Meanwhile, you have the California Fair Plan (play on words or double speak for us older folks), which is California’s attempt to issue insurance for fire coverage. The “fair plan” isn’t so fair, as it is 3 to 4 times more expensive than regular insurance companies. I understand that as I write this, the California Fair Plan is going broke and is being funded by taxpayers. I have seen quotes on this insurance for a home in the foothills of California upwards of $9,000 a year. This alone will deter people from buying homes, and in the foothills where the insurance is this high, you are seeing prices of homes falling to compensate for this, but you can only lower the price of the home so much before you have to give it back to the bank. We see foreclosure rates climbing all over the state, but it is the highest in the foothills as people are forced to take this insurance per the lenders holding the notes on the properties. As you know, if you get a mortgage on a home, you are required to have insurance.
So it is a perfect storm for the Real Estate market in California with high interest rates, high cost of insurance, and a declining demand for home ownership. As we get into the increased cost of living in California, that will open your eyes further. We have the highest gas prices in the nation, the highest state income taxes, and high property taxes, and with those being high, our food prices and durable goods are high as well. This is a major factor for people leaving California, as it is too expensive to live here. Our utility prices are the highest in the nation and getting higher as the environmentalists have convinced our leaders to get rid of water dams in the Northern part of the state, which has caused the destruction of power generation. We are also seeing water shortages for farmers and whole communities being decimated due to this insanity. It is time for a leadership change in California before it becomes a home for the rich, as they will be the only ones who can afford to live here.
Next up on the economic insanity in California will be the loss of jobs. We have already seen major oil companies leave California, such as Valero and Chevron, and in the Tech industry, we are losing many companies every day as they realize the cost of doing business in California is too prohibitive. With Artificial Intelligence (AI) taking the workload off, you will see a continued decline in jobs. With the loss of companies, you lose individual jobs. In California, we also have a huge population of State and government workers. Traditionally, these jobs have been pretty safe, but if you are losing population, you lose tax base, and with the loss of tax base, those State and government jobs become less needed, so you have to lay them off as well, and it’s coming. Another problem will be retirement for these State workers and those who are on retirement currently. You see, when the majority of the jobs are low-paying jobs, such as service providers, your tax base erodes even further, thus putting more strain on the system until it breaks. The first to go will be the retirement of those who worked for the government, and that will be a major blow, as some state retirees are receiving upwards of $200,000 a year in retirement, and if there are more retired folks than working folks putting into the retirement system, it fails and fails fast and deep. California is close to this happening as the powers at be seem to be more concerned about eating at the French Laundry than actually taking care of the real problems in this state, and it shows.
What this means for the Real Estate is not good for the next year or so. As unemployment rises, people lose their jobs, and the foreclosure rate will continue to grow. Those who have jobs will need money to pay their bills, so they will have to go into the equity in their homes, and with high interest rates, they will not be able to qualify for more money. In the first Quarter of 2026, Interest rates will have been lowered enough for more people to qualify for additional money from their homes. Over the last 2-3 years, after the low rates of 2020 and 2021interest rates have risen to the 7’s from the 2s and 3s. This has made it much harder to qualify for a mortgage, and couple that with high inflation, people have been struggling to just get by. It has been harder to save money when you have high inflation, as it does not serve anyone to save in an inflationary time, so people’s savings have depleted, in addition to everything else.
We are going to have to go through some tough times before it can get better is where this is all going. But there is light at the end of the tunnel, and hopefully it is not a train for you. This is the usual business cycle, and the market must correct itself in order to survive. This cycle is inevitable and has been going on since the invention of the Federal Reserve in 1913, and until we change that it will continue this way. I pray the powers at be change things so we can become a country of Assets again and not debt like we currently are. I see it changing, and maybe by my next article, things have changed, and I can report on a new or enhanced monetary system.