Economic news this week – The second quarter Gross Domestic Product (GDP) was released this week. It showed that the economy grew 2.8% in the second quarter, exceeding analysts’ expectations of a 2.1% increase. Technology stocks continued to drop for a third straight week. On the inflation front, the Personal Consumption Expenditures Price Index (PCE), a key indicator for the Fed, was released on Friday. It showed that consumer prices rose 2.5% in June from one year ago. That is the lowest annual increase in two years, another indication that inflation is cooling. Core PCE, which excludes volatile food and energy prices, grew 2.6% year-over-year. Economists surveyed gave just an 8% chance of a rate drop at the Fed meeting next week but gave a 92% chance of a rate drop at the September Fed meeting. All the experts agree that a rate drop cycle is not far off, as the Fed’s key rates currently at a 25-year high have successfully tamed inflation.
Stock markets – The Dow Jones Industrial Average closed the week at 40,589.34, up 0.8% from 40,257.53 last week. It is up 7.7% year-to-date. The S&P 500 closed the week at 5,459.10, down 0.8% from 5,505.00 last week. The S&P is up 14.5% year-to-date. The Nasdaq closed the week at 17,357.88, down 2.1% from 17,726.94 last week. It is up 15.6% year-to-date.
U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 4.20%, down from 4.25% last week. The 30-year treasury bond yield ended the week at 4.45%, unchanged from 4.45% last week. We watch bond yields because mortgage rates follow bond yields.
Mortgage rates – Every Thursday Freddie Mac publishes interest rates based on a survey of mortgage lenders throughout the week. The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of July 25, 2024, were as follows: The 30-year fixed mortgage rate was 6.78%, unchanged from 6.77% last week. The 15-year fixed was 6.07%, almost unchanged from 6.05% last week.
The graph below shows the trajectory of mortgage rates over the past year.
Freddie Mac was chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing. Their mandate is to provide liquidity, stability, and affordability to the U.S.
U.S. existing-home sales June 2024 – The National Association of Realtors reported that existing-home sales totaled 3.89 million units on a seasonally adjusted annualized rate in June, down 5.4% from an annualized rate of 4.11 million last June. The median price for a home in the U.S. in June was $426,900, up 4.1% from $410,109 one year ago. There was a 4.1-month supply of homes for sale in June, up from a 3.1-month supply one year ago. First-time buyers accounted for 29% of all sales. Investors and second-home purchases accounted for 16% of all sales. All cash purchases accounted for 28% of all sales. Foreclosures and short sales accounted for 2% of all sales.
Have a great weekend!