Economic Update for Week Ending June 25, 2022

Stock markets soared to rebound from three straight weeks of steep losses – Stocks markets jumped again on Friday and posted their second best week of the year. Comments from Federal Reserve officials and testimony by Fed Chairman Powell to Congress this week led sinvestors to believe that future rate hikes would not be as severe as previously thought. Powell also testified that he felt that even if there were to be a recession, which he felt could be avoided, it would be mild. He quoted many reasons for his belief in the strength of the economy which included: the strong position of U.S. banks, the strength of labor markets, the strength of the housing market and home equity, and a strong dollar. A key inflation index showed that commodity prices have fallen as recession fears have grown, indicating that the rate hikes are working and that inflation may be moderating. The Dow Jones Industrial Average closed the week at 31,500.68 up 5.4% from 29,888.78 last week. It is down 13.3% year-to-date. The S&P 500 closed the week at 3,911.74, up 6.5% from 3,674.84 last week. The S&P is down 18.0% year-to-date. The NASDAQ closed the week at 11,609.62, down 7.6% from 10,789.35 last week. It is down 25.8% year-to-date.

U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 3.13%, down from 3.25% last week. The 30-year treasury bond yield ended the week at 3.26%, down from 3.30% last week. We watch bond yields because mortgage rates often follow treasury bond yields.

Mortgage rates – The Freddie Mac Primary Mortgage Survey reported that mortgage rates as of June 23, 2022, for the most popular loan products, were as follows: The 30-year fixed mortgage rate was 5.81%, up from 5.78% last week. The 15-year fixed was 4.92%, up from 4.81% last week. The 5-year ARM was 4.41%, up from 4.33% last week.

U.S. existing-home sales – The National Association of Realtors reported that existing-home sales totaled 5.41 million units on a seasonally adjusted annualized rate in May, down 3.4% month-over-month from the annualized number of sales in April. Year-over-year sales were down 8.6% from the annualized rate of 5.92 million in May 2021. The median price of a home in the U.S. in April was $407,600, up 14.8% from $355,000 one year ago. May marked a record 123 consecutive months of year-over-year increases in the median price. Inventory levels increased 12.6% from April, but are still 4.1% below the number of homes for sale in May 2021. There was a 2.6-month supply of homes for sale in May, up slightly from a 2.5-month supply last May. First-time buyers accounted for 27% of all sales. Investors and second-home purchases accounted for 16% of all sales. All-cash purchases accounted for 25% of all sales. Foreclosure and short-sales accounted for less than 1% of all sales remaining at a historic low.