| Economic news this week – The big news this week was Federal Reserve Chairman, Jerome Powell’s comments at the Fed’s annual Jackson Hole Conference. In his speech he said, “The time has come to cut interest rates.” He further stated that inflation had moderated and was heading toward the Fed’s 2% annual target. Stocks rallied on the news. Many experts feel that there will be a .25% drop in September, perhaps a .50% in November, and a 25% drop in December. That’s a 1% drop by year’s end. Others feel that there will be three 25% drops, totaling a .75% drop by year’s end. Either way, it’s great news for loans tied to short-term rates. HLOC line of credit loans are often tied to prime. Prime rates normally follow Fed rate movements. While HLOC loans will come down the same amount that Fed rates do, long-term mortgage rates will not. Mortgage rates typically follow long-term bond rates. We expect mortgage rates to drop, but not anywhere near the amount that Fed rates drop. In other news, the number of new jobs created over the past year was revised downward by 818,000 jobs, therefore U.S. job growth has been far weaker than initially reported. This was another consideration in the Fed’s decision to announce a shift to rate cuts.
Stock markets – The Dow Jones Industrial Average closed the week at 41,175.08 up 1.3% from 40,656.79 last week. It is up 9.2% year-to-date. The S&P 500 closed the week at 5,634.61, up 3.9% from 5,554.25 last week. The S&P is up 18.1% year-to-date. The Nasdaq closed the week at 17,877.79 up 1.4% from 17,631.72 last week. It is up 19.1% year-to-date. U.S. Treasury bond yields dropped sharply this week – The 10-year treasury bond closed the week yielding 3.81%, down from 3.89% last week. The 30-year treasury bond yield ended the week at 4.10%, down from 4.15% 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 August 22nd, 2024, were as follows: The 30-year fixed mortgage rate was 6.46%, down from 6.49%, last week. The 15-year fixed was 5.62%, down from 5.66% 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. July California existing-home sales report – Prices down slightly from June, but up 6.5% from one year ago – The California Association of Realtors reported that existing-home sales totaled 278,810 on an annualized rate in July, up 4.7% from a revised 268,840 homes sold on an annualized basis last July. There was a 2.9-month supply of homes for sale, up from a 2.5-month supply one year ago. The statewide median price paid for a home in July was $886,560, down 1.6% from $900,720 in June and, up 6.5% from $832,530 one year ago.
Have a great weekend! |
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