Recent data has shown that the economy and inflation rate have heated back. The number of new jobs created in September surged. Employers added 336,000 new jobs in September, double the number that economists expected. The CPI (Consumer Price Index), the broadest measure of inflation, has risen for three consecutive months after dropping for twelve straight months prior to June. Retail sales increased to more than double the increase that experts expected. Approximately 75% of companies have reported that their third-quarter profits have beaten expectations. The third quarter GDP (Gross Domestic Product), the broadest measure of the strength of the economy, unexpectedly jumped. The reading showed that the economy expanded at an annual rate of 4.9% in the third quarter of 2023, up from 2.1% in the second quarter. Surging consumer spending was attributed to much of the increase. This left investors feeling that the Fed has lost control over the economy, as the jobs market, GDP, and consumer spending have continued to expand despite all of the interest rate hikes and other tightening measures that were supposed to slow the economy. Chairman Powell’s comments have been very strong about the Fed’s commitment to slow the economy to combat inflation. The Fed’s key rates are at their highest levels in 22 years. Many economists feel that there is a strong possibility of at least one rate increase and any hopes of the Fed dropping rates early next year seem out of the question now. Bond and mortgage rates have also surged. Treasury bond yields are now at their highest levels since 2008 and the 30-year mortgage interest rate hit 8%, its highest level since the year 2000.
Stock markets – The Dow Jones Industrial Average closed the month at 33,052.87, down 0.3% from 33,507.50 on August 30. It is up 1% year-to-date. The S&P 500 closed the month at 4,193.80, down 2.4% from 4,298.05 last month. It is up 9.2% year-to-date. The NASDAQ closed the month at 12,851.24, down 5.8% from 13,219.92 last month. It is up 22.7% year-to-date.
U.S. Treasury bond yields – The 10-year treasury bond closed the month yielding 4.88%, up from 4.59% last month. The 30-year treasury bond yield ended the month at 5.04%, up from 4.73% last month. 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 October 26, 2023, for the most popular loan products were as follows: The 30-year fixed mortgage rate was 7.79%, up from 7.31% at the end of August. The 15-year fixed was 7.03%, up from 6.72% at the end of September. These are the highest mortgage interest rates in 23 years.
Home sales data is released by the National Association of Realtors and the California Association of Realtors in the third week of the month for the previous month. Below are the September results.
U.S. existing-home sales – The National Association of Realtors reported that existing-home sales totaled 3.96 million units on a seasonally adjusted annualized rate in September, down 15.4% from an annualized rate of 4.68 million in September 2022. The median price for a home in the U.S. in August was $394,300, up 3.2% from $383,500 last September. There was a 3.4-month supply of homes for sale in September, up from a 3.2-month supply last September. First-time buyers accounted for 27% of all sales. Investors and second-home purchases accounted for 18% of all sales. All-cash purchases accounted for 29% of all sales. Foreclosures and short sales accounted for 1% of all sales.
California existing-home sales – The California Association of Realtors reported that existing-home sales totaled 240,940 on a seasonally adjusted annualized basis in September, down 5.4% month-over-month from August, and down 21.5% from a revised 307,000 annualized sales pace in September 2022. September marked the twelfth straight month with sales dropping under 300,000 on an annualized basis. Year-to-date, the number of homes sold was down 28.5% from the first nine months of 2022. The statewide median price paid for a home in July was $843,340, up 3.2% from $817,150 a year ago. There was a 2.8-month supply of single-family homes for sale in September.
The graph below has sales data for Southern California by region. This was compiled by the California Association of Real Estate.
