| Economic update for the month ending June 30, 2020 |
| Stock markets – June featured major weekly shifts in stock markets. Fueled with a better than expected May jobs report, and the largest monthly gain in retail sales ever, stocks soared at the beginning of the month. By the third week of June, the country began to see a spike in coronavirus cases, which caused many states to pause the speed of the re-opening of their economy, and some states even scaled back and closed some sectors that had recently reopened. Investors sold off stocks and stock markets lost most of their gains from earlier in the month, but still closed higher. The Nasdaq closed the month at a record high. The Dow Jones Industrial Average closed the week at 25,812.88, up 1.7% from 25,383.11 last month. It’s down 10% year to date. The S&P 500 closed the month at 3,100.29, up 1.8% from 3,044.31 last month. It’s down 3.8% year to date. The NASDAQ closed the week at 10,058.87, up 6.0% from 9,489.87 last month. It’s up 12.2% year to date.
U.S. Treasury bond yields – The 10-year treasury bond closed the month yielding 0.66%, almost unchanged from 0.65% last month. The 30-year treasury bond yield ended the month at 1.41%, unchanged from 1.41% last month. Mortgage rates dropped again this week – The Freddie Mac Primary Mortgage Survey released on June 25, 2020, reported mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate average was 3.13% down slightly from 3.15% last month. The 15-year fixed was 2.59%, down from 2.63% last week. The 5-year ARM was 3.08% down from 3.13% last month. Employers added 2.5 million jobs in May – The Department of Labor Statistics reported that the economy added 2.5 million net jobs in May. That marked an all-time record for jobs added in one month. The unemployment rate in May was 13.3%. While that marked an improvement from April’s 14.7% unemployment rate, it’s still much higher than at the peak of the Great Recession. Economists had expected the unemployment rate to be 20%, so this beat all expectations and stocks surged. It should be noted that the unemployment rate was 3.5% three months ago! Most of the job gains came from re-hiring of employees that had been laid off by companies forced to close and have now begun to reopen. While some experts questioned the methods of how the numbers were calculated, they all agreed that employers are hiring back workers faster than expected. The June figures will be released Friday and will appear on Saturday’s report. Home sales figures are released in the third week of the month for the previous month. These are May’s home sales data. California existing home sales – The California Association of Realtors announced that existing home sales totaled 238,740 on a seasonally adjusted annualized basis. As expected that was down 41.4% of the number of homes sold last May. May sales consist mostly of homes that went under contract and in escrow in March and April when it was not permitted to even show home in some cities. Fortunately, since May pending sales, homes that went under contract, have increased. The median price paid for a home in California decreased by 3.7% year over year from last May. That marked the first year over year decrease in almost a decade. Experts were not surprised by this, as many of these sales represented people that either bought homes virtually, or viewed homes in person against city ordinances. Fortunately, those ordinances changed in the third week of April, and in person, showings became permissible with safety restrictions statewide. Once that happened pending sales increased sharply. On a regional basis Los Angeles County saw a 1.4% increase in the median price, Ventura County saw a 3.1% increase, and Orange County saw a 1.2% drop in the median price from last May’s level. We are expecting the median price increases to be higher next month judging by the pending sales. California Pending Home Sales – Leslie Appleton Young the chief economist and VP of The California Association of Realtors announced that pending sales increased 67% in May from April’s pending sales figures. Pending sales are new contracts signed and reported to MLS systems. They take on average 30-60 days to close. May’s existing-home sales marked a historic low number, down over 41% of the number of homes sold last May. Fortunately, judging by the number of pending sales, June and July’s existing sales numbers will be significantly higher, and much closer to last year’s figures. |