California Home Sales Plummet Amidst Economic Uncertainty
Everythiiing.com | February 12, 2026
California's once-booming housing market is showing significant signs of cooling, with existing home sales experiencing the most substantial monthly drop since early 2022. This steep decline has sent ripples through the financial markets, influencing U.S. Treasury yields and placing heightened importance on upcoming inflation data.
Housing Market Woes Deepen in California
The National Association of Realtors reported a stark reality on Thursday: existing home sales in California for January fell by a significant 8.4% compared to the previous month. This figure considerably surpassed the Dow Jones forecast, which anticipated a more modest 4.6% slide. The total number of sales dipped to 3.91 million units.
Adding to the concern, sales were also down 4.4% when compared to January of last year, marking the slowest pace recorded since December 2023. This substantial contraction in home sales underscores a growing unease within the real estate sector, potentially signaling broader economic headwinds.
Treasury Yields React to Sales Data
The financial markets responded swiftly to the disappointing home sales figures. U.S. Treasury yields moved lower on Thursday, reflecting investor caution and a recalibration of economic expectations. The benchmark 10-year Treasury yield saw a notable decrease of more than 8 basis points, settling at 4.098%. Similarly, the 30-year Treasury yield also declined, trading at 4.733%. The yield on the 2-year Treasury note experienced a drop of over 5 basis points, reaching 3.456%. It's important to note that bond yields move inversely to their prices; a falling yield indicates rising bond prices.
Unemployment Claims Offer Mixed Signals
In parallel, the Labor Department released initial jobless claims data for the week ending February 7th. The figures showed 227,000 initial claims for unemployment insurance. While this represents a slight decrease of 5,000 claims from the prior week, it edged slightly above the 225,000 expectation from economists polled by Dow Jones. This indicates a labor market that, while showing some resilience, is not entirely free from pressure.
Nonfarm Payrolls Provide a Counterbalance
Investors are still digesting the implications of the January nonfarm payrolls report, which painted a more optimistic picture for job growth. The report revealed an increase of 130,000 jobs last month, significantly exceeding the Dow Jones economists' expectation of 55,000 and showing a robust improvement from December's figures. The unemployment rate also saw a positive tick downwards, moving from 4.4% to 4.3%.
This stronger-than-expected job growth provided some relief to investors who had been growing increasingly concerned about the labor market's trajectory, especially in light of recent data suggesting slower overall economic expansion. The perceived strength in the job market offers a crucial counterbalance to the concerning housing data.
The Crucial CPI Report Looms Large
As the market navigates these mixed economic signals, all eyes are now firmly fixed on the upcoming Consumer Price Index (CPI) report, scheduled for release on Friday. This key inflation indicator is expected to provide much-needed clarity on the persistent issue of price pressures within the economy.
"It's going to put a lot of weight on Friday's CPI report, because if that comes in tame, at least the market can understand that the inflation part of the Fed's equation is cooling," stated Tom Lee, head of research at Fundstrat Global Advisors, in a recent interview with CNBC. "And of course, now, if the job market is showing decent strength, it kind of relieves us from a macro perspective, because at least we're not seeing an economic downturn."
The Federal Reserve has been closely monitoring inflation data as it shapes its monetary policy decisions. A cooler-than-expected CPI report could signal that inflationary pressures are abating, potentially influencing future interest rate decisions. Conversely, a hotter report might reignite concerns about persistent inflation and prompt a more hawkish stance from the central bank.
The interplay between the cooling housing market, the resilient job sector, and the ever-critical inflation data will be pivotal in shaping investor sentiment and dictating market movements in the weeks and months ahead. California's real estate sector, in particular, will be watching closely to see if this current downturn is a temporary blip or the start of a more prolonged period of adjustment.
This report was compiled with contributions from Sarah Min.
