Economic update for the month ending August 31, 2018

Stocks end August at record highs – Second quarter corporate earnings lifted stock markets to record highs after most companies reported double digit gains in profits. The bull market exceeded the 1990’s bull market of 3,449 days in the last week of August and is now the longest bull market in history. The Dow Jones Industrial Average closed the month at 25,964, up from 25,306 on July 31, 2018. The Dow is up 5% year to date.   The S&P 500 closed the month of July at 2,901, up from 2,802 at the end of July. It is up 8.5% year to date. The NASDAQ closed the month at 8,109, up from 7,640 at the end of July. It’s up 17.5% year to date.

S. Wages grew at highest pace since 2009 – 201,000 new jobs created in August – The Labor Department reported that the U.S. economy added 201,000 new jobs in August. That number beat analysts expectations and marked the 95th conservative month of job growth. The unemployment rate held steady at 3.9%, a 50 year low.The highlight of the report was that wages grew 2.9% in August from one year ago. That was the highest wage growth since 2009. Wages have been rising at just 2.6% -2.7% for many years.

California Employers add 46,700 jobs in July – The Employment Development Department reported that 46,700 new jobs were added in July. The unemployment rate held at a record low of 4.2%. The number of job gains exceeded expectations, but average hourly wages in California rose just 2.2% in California from one year ago.

Treasury Bond Yields almost unchanged in August – The 10-year treasury bond closed the month yielding 2.86%, unchanged from 2.85% on July 31, 2018. The 30-year treasury bond yield ended the month at 3.02%, up from 2.98% on July 31.  We watch bond rates because mortgage rates follow bond rates.

Mortgage Rates drop in August –  The August 30, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.52%, down from 4.60% on August 2. The 15-year fixed was 3.97% down from 4.08% on August 2, 2018.  The 5-year ARM was 3.85%, down from 3.93% on August 2.

New home sales dip in July – The Commerce Department reported that sales of new homes dropped to the weakest pace in nine months in July. New home sales fell 1.7% in July from June’s levels to an annualized rate of 627,000 sales. Analysts expected the number to be closer to a rate of 645,000 sales. Prices increased just 1.8% from last July’s levels. Inventory of new homes for sale also increased to a 5.9 month supply in July. That was up from 5.7 months in June.

July U.S. Total existing home sales – The National Association of Realtors reported that the number of sales of previously owned homes fell for a fourth straight month in July. Existing home sales which include single-family homes, town-homes, condominiums, and co-ops fell 0.7% in July from June. Year over year sales were 1.5% below last July’s sales pace. That marked the fifth straight month of year over year declines in sales and the slowest pace since 2016. It should be noted that the number of existing- home sales in 2017 was a record number. Home prices continued to increase. The median price paid for an existing-home in July was 4.5% higher than last July. That marked the 77th straight month of year over year price increases. Nationally, housing inventory decreased 0.5% in July. The unsold inventory index stood at a 4.3 month supply, unchanged from last July’s level.

California existing home sales slow for third straight month in July – Prices higher – The California Association of Realtors reported that existing single family home sales totaled 406,920 in July on a seasonally adjusted annualized basis. That was down 0.9% from June and 3.4% below last July’s level when home sales totaled 421,460 on an annualized basis. The state-wide median price paid for a home was $591,460 in July, up 7.6% from last July. On a regional level prices in Los Angeles County rose 5.5%, Orange County prices rose 5.6%, and Ventura County prices rose just 2.1% from July 2017.  Inventory levels continued to increase. The unsold inventory index ticked up to a 3.3 month supply in July, up from 3.2% last July.  Active listings increased for a fourth consecutive month after 33 months of declines, increasing 11.9% from last July.

Housing affordability drops to a 10-year low in the second quarter – The California Association of Realtors reported that only 26% of California households could afford to purchase a median priced home in California. That was down sharply from 31% in the first quarter it 2018. It was also down from 29% in the second quarter of 2017. Rising home prices, higher interest rates and stagnant wage gains have driven affordable down.