Author: Rodeo Realty Media Team

156,000 new jobs added in December – While 156,000 new jobs was slightly below the number analysts expected, it marked a record 75 straight months of job gains. For 2016, the economy added over 2 million jobs. The unemployment rate ticked up from 4.6% in November to 4.7% in December as more workers began a job search. The unemployment rate has dropped more that 50% since October 2009, when the unemployment rate was 10%. Wages were the bright spot of the report. Although job growth has been steady over the last 75 months,  wages, which usually move up as the unemployment rate drops, have shown disappointing growth. In December, wages were 2.9% higher than last December. The best year over year wage growth since 2009. 

Stocks end week up after strong job and wage report is released – All indexes hit all time record highs. At one point the DOW was just 4 points from 20,000.

The DOW Jones Industrial Average closed the week at 19,963.80, up from last week’s close of 19,762.60. The S&P 500 ended the week at 2,276.98, up from its close of 2,238.83 last week. The NASDAQ closed the week at 5,521.16, up from last week’s close of 5,383.12.

U.S. Treasury Bond yields – The 10-year U.S. Treasury Bond closed the week yielding 2.42%, down from 2.45% last Friday. The 30-year Treasury Bond yield closed the week at 3.00%, down from 3.08% last week. Mortgage rates follow bond yields, so we watch treasury bonds closely.  

Mortgage rates slightly lower this week – The Freddie Mac Primary Mortgage Survey released on January 5, 2017 showed that average mortgage rates from lenders surveyed for the most popular mortgage products were as follows: The 30-year fixed rate average was 4.20%. The 15-year fixed average rate was 3.44%. The 5/1 ARM average rate was 3.33%. 

2016 U.S. auto sales have record breaking year in 2016 – Unexpectedly strong auto sales in December helped the auto industry break last year’s record. 2016 saw 17.55 million new vehicles sold, beating 2015’s record of 17.47 million vehicles.

Have a great weekend!
Syd

Stocks end the year higher – Stocks dropped early in the year before rising in the third quarter and surging after the November 8 presidential election. Stocks got off to a terrible start in 2016. They dropped 11% from January first to the second week of February as oil prices plummeted, job growth stalled and some feared the U.S. was heading to a recession. In February, oil prices hit a 13 year low of $26 a barrel before recovering and ending the year at $53 a barrel.

Growth – The first quarter GDP showed the economy grew at just 0.8%, which marked the weakest first quarter in 2 years. The second quarter was also sluggish posting just a 1.4% increase in GDP, but the economy picked up and high job growth returned in the third quarter, the GDP rebounded to a 3.5%, and stocks began to rise.

The U.S. election caused markets to surge as investors speculated that a republican president, senate and congress would follow through on their pledge to lower taxes, reduce regulation, and increase both defense spending and infrastructure spending.

The Dow Jones Industrial Average closed the year at 19,762.60 up 13.4% from the 2015 close of 17,425.03. The S&P 500 closed the year at 2,238.83, up 9.5% from its 2014 close of 2,043.94. The NASDAQ closed at 5,383.12, up 7.5% from last year’s close of 5,007.41. 

Treasury Bond yields increase in 2016 – Bond yields dropped throughout the year before rising sharply in the fourth quarter. Bond yields hit a low of 1.37% for the 10 year and 2.14% for the 30 year in July. They rose about .4% over the next 4 months. The day before the presidential election, on November 7 the 10 year was 1.83% and the 30 year was 2.60%. The U.S election was on November 8 and within a week the 10 year was 2.25% and by December 1 rates were about where they ended the year, up almost .75% in the month following the election on expectations that a better economy, increased spending, and tax cuts would lead to a higher deficit and more inflation. The 10-year Treasury bond closed the year at 2.45%, up from 2.27% at the close of 2015. The 30-year treasury yield was 3.08% on Dec. 31, up from 3.01% December 31, 2015.

Mortgage Rates – The December 29, 2016 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.32%, up from the 2015 year end where it stood at 4.01%. The 15 year fixed was 3.55%, also up from last year’s close of 3.24%. The 5-year ARM was 3.30%, up from 3.08% at end of 2015. While rates ended the year less than 1/2% above where they were at the start of the year, they are significantly higher than they were during the year. The 30 year dropped to about 3.5% in February and hovered in that range throughout the year, hitting a low of 3.25% in July, before surging in the weeks following the election. 

California home sales and prices higher than last November – The California Association of Realtors announced that November home sales totaled 442,320 homes on a seasonally adjusted annualized rate. That was up just 0.1% from October, yet up 17.7% from last November when new closing disclosure delayed closings. The unsold inventory index dropped again to a 3.1 month supply of homes on the market. That’s an all time low and down from a 4.2 month supply last November. November’s statewide median price was $501,710, up 4.9% from November 2015 when the median price was $478,140. December prices won’t be out for a few weeks, so we won’t have a year end figure until then. 

Nationwide home sales highest since February 2007 – November existing home sales rose 0.7% from October’s level and were 15.4% higher than last November, according to The National Association of Realtors. The median price for an existing home in The U.S. was 6.8% higher than November 2015. That marked the 57th consecutive month with a year over year price gain. 

A more complete year end update will be sent in the next couple of weeks when we have final home sales, jobs figures, retail sales and other results.

My predictions for 2017

Home prices – I expect home prices to increase in 2017. There will be a higher percentage gain in the median price and below. I expect the median price to increase 10%. I’d expect homes below the median price range in each area to move up even more, while homes above the median price will move up less. As we get to the higher priced homes in each area I’d expect prices to move up just slightly. Up to now, the higher price ranges have moved up more than the median priced and lower homes, that’s beginning to change. The only structural risk I see is in the very high price ranges where we are seeing an oversupply. For example, at the $20 to $40 million range we have a 3 to 5 year supply of homes on the market and under construction. This is the case in the very high end price ranges in many parts of our market. These have been overbuilt, and while exciting to discuss, they really account to only a fraction of 1% of all sales.

Mortgage rates – I would expect rates to increase slightly hitting 5%. I would not be surprised if they bounced above and below the current 4.5% range throughout the year. I’d think we are leveling from the large increase we had in the weeks following the election. More inflation and economic growth is already built in. While 5% seems high to many, it’s really a low rate if you look at historical rates over the last 40 years.

Number of sales – We don’t have final figures for 2016 yet, but I’d expect total California resales to be in the 430,000 unit range. That’s a healthy figure and I’d expect sales to remain strong, increasing by about 5%.

Mortgage products – I would expect that we will once again see stated income loans, as the Trump administration and the republicans have promised to trim back the regulations in the Dodd Frank Bill passed after the mortgage market collapse.
I’m going to summarize how this affects stated income: A lender evaluates a loan with 3 main criteria. 1. Income 2. Credit 3. Loan to value. Except for the disastrous subprime era from 2003-2007 Lenders have always required 2 out of 3. For example: Strong credit and high income would be required for a low down payment. A large down payment and strong income would allow a lender to accept a lower credit score. Unfortunately, under Dodd Frank, great credit and a large down payment would not allow waiving the income requirement, as verifying income is required under Dodd Frank. The premise was that by not having high enough verifiable income borrowers either could not afford the loan or were cheating on their taxes. While the later may be the case the argument against it is that the law is to maintain the integrity of the mortgage market, not to enforce tax law. Stated income was allowed for decades with a large down payment and strong credit. Unfortunately, during the time of subprime mortgages lenders no longer required 2 out of the 3 criteria and gave loans to people without verifying income that also had poor credit and a low down payment. I hope that never comes back, but I do expect stated income to return this year for people that put down a large down payment and have great credit. There are many self-employed people that are aggressive with their deductions and have not been able to get a loan since 2008 when this legislation took effect. Many of those people would buy if they could. Many feel stuck and would sell their home and buy another if they could. I expect stated income to return and this to change this year. Many of these buyers are in the higher than median price range. This could cause these homes to jump more than I predicted above the median price range and could cause them to move up closer than the 10% that I’d expect at the median price level. The super high end is mostly cash transactions so stated income won’t affect those homes.

I wish you all a HAPPY, HEALTHY and PROSPEROUS NEW YEAR!

See you in 2017!

Syd

 

Stocks continued to climb this week – The DOW Jones Industrial Average closed the week at 19,933.81, up from last week’s close of 19,843.41. The S&P 500 ended the week at 2,263.79, up from its close of 2,258.07 last week. The NASDAQ closed the week at 5,462.69, up from last week’s close of 5,437.16.

U.S. Treasury Bond yields – The 10-year U.S. Treasury Bond closed the week yielding 2.55%, down from 2.60% last Friday. The 30-year Treasury Bond yield closed the week at 3.12%, down up 3.19% last week. Mortgage rates follow bond yields, so we watch treasury bonds closely.  

Mortgage rates continue to rise – The Freddie Mac Primary Mortgage Survey released on December 22, 2016 showed that average mortgage rates from lenders surveyed for the most popular mortgage products were as follows: The 30-year fixed rate average was 4.30% The 15-year fixed average rate was 3.52%. The 5/1 ARM average rate was 3.32%. Rates are now about 3/4% higher than before the election 6 weeks ago. 

California adds 31,200 jobs in October- The California Employment Development Department reported that California employers added 31,200 net new jobs in October. The unemployment rate held steady at 5.5%. Los Angeles County added 38,900 jobs and the unemployment rate was 5.1%. in October. 

California home sales and prices higher than last November – The California Association of Realtors announced that November home sales totaled 442,320 homes on a seasonally adjusted annualized rate. That was up just 0.1% from October, yet up 17.7% from last November when new closing disclosure delayed closings. The unsold inventory index dropped again to a 3.1 month supply of homes on the market. That’s an all time low and down from a 4.2 month supply last November. November’s statewide median price was $501,710, up 4.9% from November 2015 when the median price was $478,140. 

Nationwide home sales highest since February 2007 – November existing home sales rose 0.7% from October’s level and were 15.4% higher than last November, according to The National Association of Realtors. The median price for an existing home in The U.S. was 6.8% higher than November 2015. That marked the 57th consecutive month with a year over year price gain. 

I wish you all a Merry Christmas, Happy Hanukkah, or any other holiday you are celebrating!   

Syd

The president of Rodeo Realty, Syd Leibovitch’s father Dr. Leibovitch calls on his children and grand children to aid the well renowned MEND organization in providing poverty stricken families with gifts for their children.

MEND is a non profit organization that aids families with hardships.  MEND’s mission is to break the bonds of poverty by providing basic human needs and a pathway to self-reliance. If you would like any information on how you can help MEND a family, please visit www.mendpoverty.org.

 

Below is the Westside Market Report for November 2016 detailing local real estate market statistics and including year-over-year data:

Westside