Economic update for the week ending February 29, 2020

U.S. Treasury bond yields – As stock markets plummeted, investors moved money from stocks to the safety of bonds. The 10-year treasury bond closed the week at its lowest level in 100 years. The 10-year treasury bond closed the week yielding 1.13% down from 1.46% last week. The 30-year treasury bond yield ended the week at 1.65%, down from 1.90% last week. We watch treasury bond yields because mortgage rates often follow bond yields.

Mortgage rates remain at the lowest levels in 3 years – The Freddie Mac Primary Mortgage Survey released on February 27, 2020, reported mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate average was 3.45%, down from 3.49% last week. The 15-year fixed was 2.95%, down from 2.99% last week. The 5-year ARM was 3.20%, down from 3.25% last week. Usually, mortgage rates follow bond yields, but lenders chose to leave rates mostly unchanged this week because they believe that these historic low bond yield levels this week would be temporary.

Preliminary February 2020 month-end update

The Dow Jones Industrial Average ended the month on February 28 at 25,409.36, down 10.1% from 28,256.03 on January 31. The S&P 500 closed the month at 2,954.22, down 8.4% from 3,225.52 at the end of January. The NASDAQ closed the month at 8,566.37, down 6.4% from 9,150.94 on January 31, 2020.

U.S. Treasury Bond Yields dropped in February – The 10-year U.S. treasury bond yield closed the month at 1.13%, down from 1.51% on January 31. The 30-year Treasury yield ended the month at 1.65%, down from 1.99% on January 31.

Mortgage Rates dropped in February – The February 27, 2020, Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 3.45%, down from 3.51% on January 30, 2020. The 15-year fixed was 2.95%, down from 3.0% on January 30. The 5-year ARM was 3.20%, down from 3.24% on January 30, 2020.

Home sales figures run one month behind. These are January’s results:

January 2020 California home sales report – The California Association of Realtors reported that existing single-family home sales totaled 396,550 in January on a seasonally adjusted annualized rate. That marked a 10.3% increase from the number of homes sold last January. It should be noted that January 2019 marked the fewest sales in a month in over a decade. The number of sales has rebounded over the last several months. The statewide median price was $575,160, down 6.5% from December, and up 7.1% from last January. The median price is the point at which ½ the homes sell for more and ½ the homes sell for less. Perhaps there was an unusual number of sales at the lower end in January, as we have seen prices increasing rapidly due to multiple offers and low inventory. The unsold inventory index in January was 3.4 months, down from 4.6 months in January 2019. On a regional level the number of sales, median price, and supply of housing were as follows: In Los Angeles County the number of sales increased by 16.7% from last January. The median price paid for a home in Los Angeles County was $617,520, up 9.1% from January 2019. There was a 3.2-month supply, down from a 4.9-month supply one year ago. In Orange County, the number of homes sold increased by 22.1% from one year ago. The median price paid for a home in Orange County was $855,000, up 7.3% from last January. There was a 3.4-month supply, down from a 5.4-month supply one year ago. In Ventura County, the number of sales rose 13.9% from January 2019. The median price in Ventura County was $660,000, up 7.3%from January 2019. There was a 4.8-month supply of homes for sale, down from a 7.2-month supply last January.

California housing affordability increases in the fourth quarter of 2019 – The California Association of Realtors reported that 31% of California households could afford to purchase a $607,040 median-priced home in the fourth quarter of 2019. That was up from 28% in the fourth quarter of 2018, as substantially lower interest rates offset price gains. A minimum annual income of $119,600 was needed to purchase a $607,400 median-priced single-family home with a monthly payment of $2,990. That payment included principal, interest, property tax and insurance with a 20% down payment, and a 30-year fixed loan. Affordability also increased for condominiums and townhomes from one year ago. The report revealed that41% of California households could afford a $480,000 median-priced condominium or townhouse, up from 37% one year ago. An income of $94,400 was needed to qualify for a monthly payment of $2,360 on a median-priced condominium or townhome. Single-family home affordability in Los Angeles County was 27% in the fourth quarter of 2019, up from 24% in the fourth quarter of 2018. The median price in Los Angeles County in the fourth quarter of 2019 was $617,310, and the monthly payment was $3,040. Single-family home affordability in Orange County was 26% in the fourth quarter of 2019, up from 20% in the fourth quarter of 2018. The median price in Orange County in the fourth quarter of 2019 was $828,000, and the monthly payment was $4,070. Single-family home affordability in Ventura County was 31% in the fourth quarter of 2019, up from 29% in the fourth quarter of 2018. The median price in Ventura County in the fourth quarter of 2019 was $660,000, and the monthly payment was $3,250.

January 2020 U.S. existing-home sales report – The National Association of Realtors reported that Total existing-home sales which include completed transactions for single-family homes, condominiums, townhomes, and co-ops increased 9.6% year over year from the number of home sales last January. The nationwide median price increased by 6.8% from January 2019. Total housing inventory for sale dropped 10.7% from the number of homes for sale in January 2019. There was a 3.1-month supply of homes for sale in January, down from a 3.8-month supply one year ago.