Economic Update for the Week Ending March 6, 2020

The U.S. Economy Added 273,000 New Jobs in February 

The Department of Labor Statistics reported that U.S. employers added 273,000 new jobs in February. Monthly job gains averaged 230,000 over the past six months, the highest job gains in two years. The unemployment rate dropped to 3.5%, a 50-year low, from 3.6% in January. Average hourly wages grew 3% from one year ago. The report demonstrates just how strong the American economy was prior to the coronavirus outbreak.

Stock Markets End Week Slightly Higher than Last Week When Stocks Had Their Biggest Weekly Decline Since the 2008 Financial Crisis

It was a turbulent week with 1,000 point daily swings, but markets held on to be slightly higher for the week as the coronavirus reached pandemic levels, spreading to every continent on the globe. Analysts fear that the economic impact will be devastating to the travel industry, and severely impact the worldwide economy. In a surprise move the Federal Reserve made an emergency ½% rate cut in order to lend support to the economy. Nobody knows what the final economic impact of the coronavirus will be. The Dow Jones Industrial Average closed the week at 25,864.78, up 1.8% from 25,409.36 last week. It’s down 9.4% year to date. The S&P 500 closed the week at 2,972.37up 0.6% from 2,954.22 last week. It’s down 8% year to date. The NASDAQ closed the week at 8,575.62, up 0.1% from 8,567.37 last week. It’s down 4.5% year to date.

Coronavirus Impact on the Real Estate Market 

The meltdown in stocks has pushed interest rates to 40-year lows. We did not see any decline in sales in the last two weeks. In fact, there are so many sales, inventory levels are shrinking because new listings are not keeping up with the number of sales. Inventory levels are now back to 2017 levels, which represented historic lows. This has caused multiple offers on homes that are priced realistically, pushing prices up.

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 0.74% down from 1.13% last week. The 30-year treasury bond yield ended the week at 1.25%, down from 1.65%, last week. We watch treasury bond yields because mortgage rates often follow bond yields.

Mortgage Rates at 40-Year Lows 

The Freddie Mac Primary Mortgage Survey released on March 5, 2020 reported mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate average was 3.29%, down from 3.44% last week. The 15-year fixed was 2.79%, down from 2.95% last week. The 5-year ARM was 3.18%down slightly from 3.20% last week. Usually, mortgage rates follow bond yields, but lenders have not lowered rates to the extent that bond yields have dropped.