Economic update for the month ending July 31, 2020

Stock markets saw significant gains in July – Stock markets closed higher for the fourth straight month in July,  reversing almost all of the losses since the start of the pandemic. It has not been all good news, as July marked a resurgence in COVID-19 cases which caused many local and state leaders to pull back on their reopening. Experts believe this may stall the job gains we have seen over the past few months, and are awaiting the July jobs report which will be released next Friday, August 7. The second-quarter GDP recorded a 32.6% quarterly loss, its largest ever, but that was in line with the number expected by analysts following the first-ever government economic shutdown. On the positive side, tech companies are recording much higher than expected second-quarter earnings. For example, Facebook, Amazon, and Apple reported earnings that crushed expectations. Overseas economies are also recovering quickly. Retail sales have seen record month over month increases from the levels at the start of the pandemic.  Experts, while still cautious, believe the worst of the economic devastation is behind us. Investors also feel that vaccine trials worldwide indicate that there will be vaccines available by years end. Although disappointed that a fourth stimulus bill has not been approved, investors feel that it is just a matter of time before one is. The lowest plan pumps one trillion dollars into the economy, and the highest proposal pumps three trillion dollars into the economy. The final bill will be somewhere in the middle of those numbers.  Lastly, the Federal Reserve announced that its key interest rate will remain near zero percent for the foreseeable future. The Dow Jones Industrial Average closed the month at 26,428.32, up 2.4% from 25,812.88 last month. It’s down 7.4% year to date. The S&P 500 closed the month at 3,271.12, up 5.5% from 3,100.29 last month. It’s up 1.3% year to date. The NASDAQ closed the week at 10,725.57, up 6.6% from 10,058.87 last month. It’s up 19.8% year to date.

U.S. Treasury bond yields – The 10-year treasury bond closed the month yielding 0.55%, down from 0.66% last month. The 30-year treasury bond yield ended the month at 1.20%, down from 1.41% last month.

Mortgage rates continued to drop in July – 30-year fixed rate under 3%! – The Freddie Mac Primary Mortgage Survey released on July 30, 2020, reported mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate average was 2.99%, down from 3.13% last month. The 15-year fixed was 2.51%, down from 2.59% last week. The 5-year ARM was 2.94%, down from 3.08% last month.

Employers added 4.8 million jobs in June – The Department of Labor and Statistics reported that 4.8 million new jobs were added in June. That eclipsed analysts’ expectations of 2.9 million new jobs. The unemployment rate dropped to 11.1% from 13.3% in May. It was 14.7% in April, the highest reading since the Great Depression, so the last two months have shown a very positive trend. July numbers will be released next Friday.

Home sales data is released in the third week of the month for the previous month. July’s results will be included in the weekly update on the third week of August and on the August month-end report. Judging by pending sales of July’s figures will exceed June sales and price increases. 

Existing home sales rebound in June – The California Association of Realtors announced that existing home sales surged 42.4% in June from May‘s sales totals. Existing home sales totaled 339,910 on a seasonally adjusted annualized rate in June. That was down 12.8% from June 2019. Fortunately, pending sales have also increased dramatically. The California Association of Realtors expects sales to be back to pre-pandemic levels by July or August. Prices also surged in June. The state-wide median price paid for a home in June was $626,170. That represented a 6.5% increase from May and a 2.5% increase from last June. Inventory levels declined to a 2.7 month supply of homes for sale which explains the number of homes selling with multiple offers. On a regional basis, Los Angeles County had a 1.8% year over year increase in the median price. Ventura County had an 8.2% year over year increase in the median price. Orange County had a 3.3% year over year increase in the median price.

U.S. existing home sales rebounded at a record pace in June – The National Association of Realtors announced that total existing-home sales, which include single-family, condominium, townhomes, and co-ops, increased 20.7% in June from the number of sales in May. This reversed three months of sales declines caused by the pandemic. Real estate sales in all regions of the country reported record month over month increases in sales. The number of sales was still down 11.4% from the number of sales last June, but pending sales have increased and the N.A.R. and associations around the country expect sales to be back up to last year’s levels in the next two months. The median price paid for a home was up 3.5% of the price paid last June. Inventory levels dropped to a 4 month supply, down from 4.3 months, one year ago.