Economic update for the week ending November 19, 2016

Stocks up again – Markets increased marginally this week, adding to the record breaking gains and levels reached last week. The DOW Jones Industrial Average closed the week at 18,867.93 up from 18,847.66 last Friday. It is up more than 5.5% in the week and a half since the election. The S&P 500 closed the week at 2,181.90 up from 2,164.45 last week. The NASDAQ closed the week at 5,321.51 up from last week’s close of 5,237.11.

Inflation while tame increases – U.S. Consumer prices recorded their largest increase in six months in October suggesting a pickup in inflation. The Labor Department’s Consumer Price Index increased 0.4% last month after rising 0.3% in September. In the last 12 months ending October, the CPI has increased 1.6%, its biggest increase since October 2014. They also measure Core CPI which excludes food and energy costs. Core CPI increased 2.1% from last October. The Fed has their own measurement of inflation. It was 1.7% in October. Their target is 2%, but most experts expect them to increase their key interest rates in December, as inflation has finally shown signs of ticking up. 

U.S. Treasury Bond yields jump – The 10 year U.S. Treasury Bond yield closed the week at 2.34%, up from 2.15% last Friday. The 30-year U.S. Treasury Bond closed at 3.01%, up from 2.94% last week. Mortgage rates follow bond yields so we watch bond yields closely.

Mortgage rates continued to rise last week – The Freddie Mac Primary Mortgage Survey which was released on November 17, 2016 showed that average mortgage rates from lenders surveyed for the most popular mortgage products were as follows: The 30-year fixed rate average was 3.94%. The 15-year fixed average rate was 3.14%. The 5/1 ARM average rate was 3.07%. Rates increased further throughout the week so next week’s rates will be higher. Currently, the 30-year fixed rate is around 4.25%. 

Home sales and prices increase in October – The California Association of Realtors released its October home sales report. The number of existing homes sold in October totaled 442,970 on a seasonally adjusted annualized rate. That represented an increase of 4.1% from September and a year over year increase of 8% from last October’s figures. The statewide median price was $513,520, up 1.2% from September and up 7.3% from last October when the median price was $478,780. Inventory continues to be near record lows as the unsold inventory index slipped to a 3.4 month supply of homes listed in October from a 3.5 month supply in September.