Economic Update for the month ending May 31, 2018

Employers add 223,000 new jobs in May – Unemployment rate drops to 3.8% – The Department of Labor Statistics reported that U.S. employers added 223,000 new jobs in May. That exceeded the 190,000 that analysts expected. The unemployment rate dropped to 3.8%, the lowest reading since 2000. The unemployment rate has steady declined from its peak of 10% in 2009. Average hourly wages grew 2.7% from May 2017.

California added 39,300 jobs in April and unemployment dropped to a record low  – The Employment Development Department reported that 39,300 new jobs were created in April. The statewide unemployment rate dropped to 4.2%. 

Stock markets higher in May despite huge daily swings – It was a crazy turbulent month for stocks with daily swings in the DOW of as much as 450 points, yet stocks ended the month higher. Major news included the announcement of tariffs against China, followed by an announcement that a deal was in place and tariffs were on hold, followed by an announcement of even more tariffs just one week later. In the closing days of the month, tariffs were placed on steel and aluminum imports from Canada, Mexico and The European Union. China, Canada, Mexico, and The EU retaliated with tariffs on U.S. goods. These on and off again trade wars caused stocks to fluctuate sharply. The Fed also released a statement that led investors to believe they were not as hawkish on raising interest rates as many had felt. That was well received. The Dow Jones Industrial Average closed the month at 24,415, up from its April 30, 2018 close of 24,163. The S&P 500 closed the month of May at 2,795, up from its April 30, 2018 close of 2,648. The NASDAQ closed the month at 7,442, up from its April 30 close of 7,066.

Treasury Bond Yields lower at the end of May  – The 10-year treasury bond closed the month yielding 2.83%, down from 2.95% on April 30, 2018. The 30-year treasury bond yield ended the month at 3.00%, down from 3.11% on April 30. We watch bond rates because mortgage rates follow bond rates.

Mortgage Rates end month almost unchanged  –  Mortgage rates spiked in May, but they settled back down in the last week of May to end the month just slightly higher. The May 31, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.56%, almost unchanged from 4.55% on May 3, 2018. The 15-year fixed was 4.06%, up slightly from 4.03% on May 3. The 5-year ARM was 3.80% up from 3.69% on May 3.

U.S. existing home sales pace slows and prices increase in April – The National Association of Realtors announced that the number of sales of existing homes nationwide dropped 1.6% on a year-over-year basis in April. It should be noted that U.S. existing home sales were at record levels in 2017, so even with a slight drop, although not optimal, sales numbers are still at a robust level. Prices continued to increase. The median price paid for a home nationally was up 5.3% from last April, the 74th straight month of year-over-year increases. The number of existing homes for sale were 6.3% lower than last April. The unsold inventory index nationwide had a 4 month supply of housing available for sale, down from a 4.2 month supply last April. That was the 42nd straight month of year-over-year inventory level declines. The western region of the U.S. showed even better results. Sales for the western region were down just 0.8% year-over-year and the median price was 6.8% higher than last April.

California existing home sales and prices increase in April – The California Association of Realtors reported that total existing home sales totaled 416,790 in April, on a seasonally adjusted annualized rate, that was 2.2% higher than last April’s sales rate. Prices continued to increase. Statewide the median price paid for a home was $584,460, up 8.6% from April 2017. Local markets posted varying gains. In Los Angeles County, the median price paid for a home was up 10.1% from last April. The median price in Ventura County increased just 4.7% year-over-year. The Orange County median price gained 5.5%Inventory levels rose 1.9% in April, marking the first rise in three years. The unsold inventory index in April had a 3.2 month supply of homes, up from a 2.9 month supply in March, but still lower than a 3.3 month supply in April 2017.

Housing Affordability index rises in first quarter of 2018 – The California Association of Realtors reported that 31% of home buyers could afford to purchase a median-priced existing single-family home in California in first-quarter of 2018. That was up from 29% in the fourth quarter of 2017. Year-over-year affordability was down slightly. The index stood at 32% in the first quarter of 2017.