September 15, 2025 – Despite ongoing challenges such as rising consumer prices and a cooling labor market, recent data indicates resilience in several areas of the economy. Home sellers in California continue to see substantial gains, small business optimism is trending upward, and foreclosure rates remain below pre-pandemic levels. While inflation and uncertainty persist, these positive signals – alongside supportive monetary policy and the recent uptick in mortgage application activity - suggest there are reasons to remain hopeful about the months ahead.

Prices consumers pay climb again and post the biggest gain since January: Inflation on consumer goods/services continued to rise and exceeded economists’ expectations last month. The Consumer Price Index (CPI) was up on a monthly basis by 0.4% as both food (0.5%) and energy prices (0.7%) jumped solidly from the prior month. The overall price level increased by 2.9% on a year-over-year basis and reached the highest level since January 2025. Excluding energy and food, core CPI was unchanged and registered a year-over-year gain of 3.1% in August. Vehicle prices contributed to the monthly gain in price, with new cars up 0.3% and used car/trucks rose 1%. Core services’ inflation also picked up with a monthly increase of 0.3% last month, as airfares jumped 5.9%, while lodging away from home increased 2.3%. On the other hand, the producer price index (PPI) – wholesale inflation - showed an unexpected decline of 0.1% in August after rising by 0.7% in July. The latest reports on consumer prices and wholesale prices imply that price growth is far from over, and there will be more inflation in the coming months.

Small business optimism inches up again in August: The NFIB Small Business Optimism Index increased 0.5 points in August to 100.8, after surpassing the 100-benchmark for the first time in five months in July. The level of optimism for small business owners was nearly three points above the 52-year average of 98, as the net percent of owners expecting higher sales volumes in the next three months increased 6 points from July and reached a net 12% in August. When asked to rate the overall health of their business, more than two-thirds (68%) reported it as either excellent (14%) or good (54%), an increase of 3 points from the prior month. Despite the improvement in overall optimism, level of uncertainty remained elevated with the uncertainty index falling 4 points to 93 but was still the 11^th highest reading in the last 51 years. One in ten (11%) owners mentioned that inflation was their single most important problem in operating their business, but the net percent of respondents raising average selling prices dropped again by another 3 points to a net 21%, which is the lowest reading for 2025. Despite the decline, the level in August remains well above the historical average of 13%. A net 26% planned to increase prices in the next three months, a drop of 2 points from the prior month.

Foreclosure activity increases for sixth straight month as unemployment starts trending up: Foreclosure filings on U.S. properties declined on a month-over-month basis in August but increased for the sixth straight month year-over-year, as the labor market begins to slow. According to ATTOM, there were a total of 35,697 U.S. properties with foreclosure filings last month, a decrease of 1.1% from July 2025 but a surge of 18.1% from August 2024. At the national level, one in every 3,987 housing units had a foreclosure filing in August 2025. Statewide, California had one foreclosure in every 3,538 homes and was ranked the 14^th highest in foreclosure rates among all states. Lake, Mendocino, and Humboldt were the counties with the worst foreclosure rate in California. 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 second half of 2025 and early 2026, more homeowners will likely experience added financial strain, which could result in higher foreclosure rates in the next 12 months.

Expectations on job finding hit series low as income growth remains unchanged: Results from the New York Fed’s Survey of Consumer Expectations suggest that consumers’ optimism on the labor market deteriorated last month, while their expectations on household financial situation remained broadly unchanged. The likelihood of losing one’s job in the next 12 months inched up 0.1 percentage points to 14.5% in August, and the odds of finding a job in the next three months if one’s current job was lost fell sharply by 5.8 percentage points to 44.9%, reaching the lowest level since the start of the series in June 2013. Meanwhile, respondents in August expected their earnings 12 months from now to grow by 2.5%, a dip of 0.1 percentage points from the prior month. More consumers expected their financial situation to get worse a year from now, as the share who believed their household finance will deteriorate declined 0.7 percentage points to 27.7% in August from 27% in July. The latest perception on household financial situation remained worse than the year-end number, as less than 20% believed their household finance would get worse 12 months from then in December 2024.

Sellers are still making near-record gains from their home sales: With the statewide median price hitting its peak earlier this year, proceeds from California home sales remained near record high in 2025. Results from this year’s C.A.R. Annual Housing Market Survey indicate that home sellers typically pocket a net cash gain of $350,000 from the sale of their homes, an increase of 2.8% from $340,500 registered in 2024 but a 2.2% drop from the record high of $358,000 reached in 2023. In terms of percentage, it is equivalent to a 100% gain from the purchase price. While not all home sales ended with a profit in 2025, 95% of all sellers made a net gain from their housing transactions this year. The share of sellers with a net gain this year dipped from last year’s 96.9% but remained above the long-run average of 90%.

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