Stocks close the week with big gains – Minutes from the Federal Reserve’s September meeting released this week made investors feel that the Fed’s first rate rise since 2006 will not happen this year. The notes revealed that The Fed is worried about unusually low inflation, spill over from slowing in China, and unusually low wage growth. They also said that the economy was still growing. The September jobs report showed job growth around 140,000 jobs a month for the last 2 months, after averaging 212,000 new jobs monthly for the first 7 months of the year. That slowdown also caused investors to expect that The Fed will not raise rates in the next couple of months as previously expected. Higher interest rates mean higher borrowing costs which cut into corporate profits, so continued low rates were seen as positive by investors. Oil prices also rose this week on fears of Russia’s involvement in Syria. Low oil prices have hurt the energy sector, so energy stocks rose on higher oil prices. The dollar which has been strong this year and has caused U.S. goods to be more expensive overseas and overseas goods to be less expensive here in the U.S. also weakened this week. This was helpful as exports have suffered as a result of the strong dollar and slowing economies overseas. The Dow Jones Industrial Average closed the week at 17,084.49, up from last week’s close of 16,472.37. The S&P 500 closed the week at 2,014.89, up from last Friday’s close of 1,951.36. The NASDAQ closed the week at 4,830.47, up from last week’s close of 4,707.78.
Treasury bonds rise from last week’s lows – The 10 year Treasury bond yield closed week at 2.12%, up from 1.99% last Friday. The 30 year treasury bond yield closed Friday at 2.94%, up from last week’s close of 2.82%. Bond yields follow stocks as money moves. Often when investors sell stocks on fears in the stock market they buy bonds which are safe but offer a low return. This week they bought stocks and sold bonds which drove bond yields higher.
Mortgage rates rise from last week’s lows of the year – The 30 year fixed rates are around 3..875% for loans up to $417,000, and around 4.00% for loans over $417,000. The 15 year fixed rate loans are about 3.20% for loans up to $417,000, higher loan amounts have rates that are around 3.375%. 5-Year-ARM and 3–Year ARM rates are both around 3.00%.
September sales data will be released later in the month. It will be interesting to see how prices and sales numbers are holding up. Stay tuned!
Have a great weekend!
Economic update for the week ending September 5, 2015
Economy adds 173,000 net new jobs in August- The Labor Department Reported that the economy added 173,000 new non-farm jobs in August. This was below the 220,000 jobs expected. The unemployment fell to 5.1%, its lowest level in 7 years. That is down from 5.3% last month and has dropped nearly in half since peaking during the recession. The most positive part of the report was that wages, that have been stagnant, rose 8 cents an hour in August following a 6 cent an hour rise in average wages in July. This was welcome news after June’s number showed that the April, May, June quarter had the lowest wage growth in over 30 years. August’s figure shows wage growth of 2.2% over the last 12 months, which is well over the inflation rate.
Stocks down again this week – Fears of China’s slowdown and a possible interest rate hike by the Fed spooked the markets. More bad economic data from China showed their economy slipping further. At the same time U.S. G.D.P. rose 3.7%, which was better than expected. The August jobs number showed fewer new jobs than expected, yet the unemployment rate fell to near pre-recession levels, and wages, which have been stagnant, rose more than expected. Auto sales were strong, another sign that U.S. consumers are spending money. The Federal Reserve Beige Book, the Fed’s assessment of the strength of the economy, showed that they felt that the economy was growing at a “modest to moderate pace” and that the Chinese slowdown is havering a “only a moderate affect on the U.S. economy.” This again got investors fearing an interest rate hike by the Fed. Some fear that the first rate hike since 2006 could happen as soon as it’s September 16th – 17th meeting. This was also a drag on stocks. The Dow Jones Industrial Average closed the week at 16,102.38, down from last week’s close of 16,643.01. The S&P 500 closed the week at 1,921.22, down from last Friday’s close of 1,988.87. The NASDAQ closed the week at 4,683.92, down from last week’s close of 4,828.33.
Mortgage rates remain near lows for the year – The 30 year fixed rates ended the week around 3.875% for loans up to $417,000, and around 4.00% for loans over $417,000. The 15 year fixed rate loans are about 3.25% for loans up to $417,000, higher loan amounts have rates that are around 3.375%. The 5 Year-ARM rate is around 2.75% and 1 Year-ARM mortgages are about 2.50%.
Treasury Bond yields rose from lows early in the week and closed higher than last week – Investors bought stocks and pulled money from the safety of U.S Treasury Bonds pushing yields up from Monday’s lowest point in over a year. The 10 year Treasury bond yield closed week at 2.13%, almost unchanged from 2.19% last Friday. The 5 year was under 2% at one point on Monday. The 30 year treasury bond yield closed Friday at 2.89%, down slightly from last week’s close of 2.92%.
U.S. Bank’s earnings rise – The FDIC reported that profits from U.S. Banks rose 7.3% in the second quarter of 2015. The number of “problem banks” continued to fall. Only 5.6% of all banks were not profitable. This was by far the most healthy banks have been since the financial crisis which began in 2007.
Factory orders higher – Orders from U.S. Factories posted a modest gain in July according to The Commerce Department. Factory orders were up 0.4% in July. This was not as good as June’s 2.2% increase, but it did build on that increase.
Have a great holiday weekend!
Economic update for week ending 2-24-2014
Stocks took a substantial slide this week as the Dow closed the week under the 16,000 mark with both the Dow and S&P 500 taking their worst weekly losses in over a year. There was a substantial selloff on Thursday as investors digested weak Chinese economic data and dealt with currency drops in emerging markets. Some economists are saying that this may be the beginning of a correction in the stock market after last year’s meteoric rise. The Dow closed out the week at 15,879.11 down -3.52% from last week’s close of 16,458.56. The Nasdaq closed at 4,128.17 down -1.65% from last week’s 4,197.58 close. The S&P 500 finished the week at 1,790.29 down –2.63% from last week’s 1,838.70 close.
Interest rates dropped this week awaiting the next meeting of the Fed later this month. The Freddie Mac Weekly Primary Mortgage Market Survey showed that the 30-year-fixed rate dropped to 4.39% from 4.41% last week. The 15-year-fixed fell to 3.44% from last week’s 3.45%. A year ago the 30-year fixed was at 3.42% and the 15-year was at 2.71%. Loans over $417,000 are about 1/2% higher in rate.
The 10-year Treasury note yield rate continues to fall this week ending at 2.75%, after last week’s 2.84% close. It was 1.88% a year ago, but reached 3% in December.
The National Association of Realtors® reported that existing home sales were up 1.0% in December increasing to a seasonally adjusted annual rate of 4.87 million in December from a downwardly revised 4.82 million in November. This is – 0.6% below the 4.90 million-unit level in December 2012. For all of 2013, there were 5.09 million sales, which is 9.1% higher than 2012. It was the strongest performance since 2006. The national median existing-home price for all of 2013 was $197,100, 11.5% above the 2012 median of $176,800, and was the strongest gain since 2005 when it rose 12.4%. The median existing-home price for all housing types in December was $198,000, up 9.9% from December 2012. Distressed homes represented 14% of December sales; they were 24% in December 2012. Total housing inventory at the end of December fell 9.3% to 1.86 million existing homes available for sale, which represents a 4.6-month supply at the current sales pace, down from 5.1 months in November. I use these numbers to point out that the dramatic price increase we have seen has been similar though out many areas nationally.
Realtor.com® released its final National Housing Trend Report for 2013 which showed that the median list price for December 2013 was 8.1% above December 2012, the median age of inventory was down by -5.1% and the number of units for sale was essentially unchanged. The total inventory of homes for sale in the United States declined from 1,846,155 units in November to 1,731,017 units in December, while month-over-month inventory rose from 101 to 112 days, and the median list price declined from $197,700 to $194,500. The median price for the Los Angeles-Long Beach MSA rose 28.5% for the year, up to $455,000 while the amount of listings fell by -9.75% to 19,633 and the median age of inventory fell for the year by 12.33% to 64.
DataQuick announced that California foreclosure activity hit an eight-year low in the fourth quarter of 2013 with a total of 18,120 default notices filed on houses and condominiums from October through December, down -10.8% from 20,314 in the previous quarter and down a whopping -52.6%from 38,212 from the same period of 2012. This marks the lowest number of default notices since 15,337 were filed in the fourth quarter of 2005.
The Pending Homes Sales Index for December from the California Association of Realtors® showed that pending sales dropped -25.2% in December to reach 68.8 down from a revised index of 92 in November, based on signed contracts. Pending sales were down 16.8% from the revised 82.8 index recorded in December 2012. The share of equity sales in December dipped to 84.3%, down from 86.4% in November. Equity sales made up 63.4% of sales in December 2012. The share of distressed sales to total sales in Los Angeles County was 18% in December 2013. It was 14% in November and 35% in December 2012.
We are seeing activity begin to increase dramatically. Over the last week our open escrow count has began to increase rapidly. We are also seeing what appears to me as another surge in prices. This is not unusual. It is common for prices to increase steadily from February to June or so and then flatten. I’d expect the same in 2014!
Have a great weekend!!