High interest rates, inflation, and uncertainty around the Trump administration’s economic policies are weighing on California consumer spending, as many residents postpone big-ticket purchases such as homes and cars.
According to recent data from real estate analytics firm Attom and the California New Car Dealers Association (CNCDA), projected new-vehicle sales and home transactions in California this year are either flat or down from a year earlier, and are far below levels seen around the pandemic boom.
The CNCDA estimates that new-vehicle sales in California will total about 1.79 million units this year. That would be a 2% increase from a year earlier, but follows a 1% decline in 2023, leaving the market essentially stagnant over the past two years. This year’s projected sales are still 12% lower than the peak in 2017, when roughly 2.03 million vehicles were sold.
Analysts say buyers have pulled back as new-car prices climbed rapidly while incomes failed to keep pace. The average price of a new vehicle recently topped $50,000 for the first time.
John Sackrison, executive director of the Orange County Auto Dealers Association, said automakers shifted toward higher-end models when parts shortages squeezed production during the pandemic, driving vehicle prices sharply higher. “Production has now normalized,” he said, “but consumers still feel the strain of elevated prices.”
On the housing side, Attom projects that home sales in California will total about 317,000 transactions this year, down 2% from a year earlier. That follows a 5% gain the previous year, after which sales have turned downward again. Compared with 2021, when low interest rates fueled a surge to about 543,000 transactions, this year’s volume is down roughly 42%.
Mortgage rates above 6% have further eroded affordability. The average 30-year fixed mortgage rate this year is about 6.8%, more than double the 2.9% average seen in 2020 during the early pandemic. Higher borrowing costs reduce what buyers can afford, leading to fewer completed sales.
Jee Lee, director of the Shalom Center, a Federal Housing Administration (FHA)-approved nonprofit, noted that while mortgage rates have edged back toward the low-6% range in recent weeks, the change is not enough for most households to feel real payment relief. He said meaningful improvement in housing activity will require home prices to adjust along with interest rates.
The national picture is similar, with large purchases slowing across the country. Forecasters expect U.S. new-vehicle sales to reach about 16.3 million units this year, down 3% from last year. Existing-home sales nationwide are projected at about 4 million transactions, a 2% decline.
Experts say these trends reflect rising caution among households. When families are unsure about the future, they tend to delay big purchases that require taking on long-term debt. Recent signs of slower job growth, wage stagnation, and persistent inflation have squeezed household budgets and weakened the sense of economic stability that typically supports major spending.
Even so, some in the auto industry see a chance for modest improvement in California consumer spending on vehicles. Jay Jang, vice president at Eden Motor Group, said auto loan rates have fallen from the high-6% range early this year to the high-4% range in some cases, as recent interest-rate cuts work through the market. He added that factory incentives from manufacturers worried about soft sales are further reducing monthly payments, which could gradually bring more buyers back into showrooms.
BY HOONSIK WOO [woo.hoonsik@koreadaily.com]
