| Stock markets ended the month sharply higher – Investors pushed stocks higher this month following news from the Fed that they are shifting their monetary policy. For the first time in two years the Fed has come out and acknowledged that their tightening campaign has tamed inflation and that they feel that there could be as many as three rate cuts next year. With their key interest rates at their highest levels in 23 years, rate cuts are something that investors are looking forward to. The Dow Jones Industrial Average closed the month at 37,689.40, up 4.8% from 35,950.89 on November 30. It gained 13.7% in 2023. The S&P 500 closed the month at 4,769.89, up 4.4% from 4,567.90 last month. It gained 24.2% in 2023. The NASDAQ closed the month at 15,011.35, up 5.3% from 14,262.22 last month. It is up 43.4% from its close in 2022.
U.S. Treasury bond yields – The 10-year treasury bond closed the month yielding 3.88%, down from 4.38% last month. The 30-year treasury bond yield ended the month at 4.03%, down from 4.54% 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 December 28, 2023, for the most popular loan products were as follows: The 30-year fixed mortgage rate was 6.61%, down from 7.22% at the end of November. The 15-year fixed was 5.93%, down from 6.56% at the end of November.
Home sales figures are released by the California Association of Realtors and the National Association of Realtors on the third week of the month for the previous month. These are November’s results. U.S. existing-home sales – The National Association of Realtors reported that existing-home sales totaled 3.82 million units on a seasonally adjusted annualized rate in November, down 7.3% from an annualized rate of 4.12 million in November 2022. The median price for a home in the U.S. in November was $387,600, up 4% from $372,700 last November. There was a 3.5-month supply of homes for sale in November, up from a 3.3-month supply last November. First-time buyers accounted for 31% of all sales. Investors and second-home purchases accounted for 14% of all sales. All-cash purchases accounted for 29% of all sales. Foreclosures and short sales accounted for 1% of all sales. California Association of Realtors November existing-home sales report – The California Association of Realtors reported that existing-home sales totaled 223,940 units on a seasonally adjusted annualized basis in November, down 7.4% from October. November marked the third straight month of the annualized sales rate dropping under 250,000, a level that was thought could never happen, and the 29th straight month of year-over-year declines in sales. Year-to-date, the number of homes sold was down 25.9% in November. Prior to 2022 home sales have rarely dropped below 400,000 in decades. They will end the year somewhere around 250,000. While historically interest rates are not that high, compared to the lowest rates in 50-years during COVID the shock of going from the lowest rates in decades to the highest rates in 23-years has caused many potential home sellers to put off their move. In a normal year about 50% of sales are what we call move-up buyers. Those are people selling a home to purchase another. When your mortgage is at a 3% rate, it’s difficult to sell it and purchase another with a mortgage at a 7% rate. For example, if you own a $2 million dollar home with a $1 million mortgage at 3%, your payment with taxes and insurance is about $4,500. If you put your $1 million in equity down on your new $4 million dollar home and obtained a $3 million loan at 6.5% (down from almost 8% two months ago) your payment with tax and insurance would be around $24,000 a month. That’s a big jump and has caused many people to stay in their current home that would normally move to a new home. When people put off their move it reduces the number of homes for sale. This is exactly what is happening now. The statewide median price paid for a home in November was $822,200, up 6.2% from a revised $774,150 a year ago. There was a 3-month supply of homes on the market, up from 2.7-month supply of homes for sale in October, and down from a 3.2-month supply one year ago. The graph below shows sales data by county in Southern California.
|
News & Media
