bond Archives - Rodeo Realty

January 25, 2019January 25, 2019

2018 Year End Economic Update

2.6 million new jobs were added in 2018 as unemployment dropped to a 40-year low – The Bureau of Labor Statistics reported that U.S. employers added 312,000 new
jobs in December. This shocked analysts that had forecasted 178,000 new jobs.
There were 2.6 million jobs added in 2018, up from 2.2 million new jobs in 2017. The unemployment rate rose to 3.9% from 3.7% in November, a 40-year low, as 419,000 new workers entered the workforce. Optimism about finding an acceptable job and
higher wages were credited with expanding the workforce. Wages rose 3.2% from
one year earlier, matching October’s year over wage gains which marked the largest
year over year wage gain since April 2009.

Stock markets ended the year lower in 2018 – After hitting all-time highs in
September, which marked the longest bull market in history, stocks took a downturn in the last quarter of the year. December marked the worst December drop since the Great Depression as fears of a trade war, political uncertainty, slowing economic activity overseas, and higher interest rates made investors more cautious. The Dow Jones Industrial Average ended 2018 at 23,327.46, down from 24,719.22 at the close of 2017.The S&P 500 closed the year at 2,506.85, down from 2,673.51 at the end of 2017. The NASDAQ closed at 6,635.28, down from 6,903.39 on December 31, 2017.

U.S. Treasury Bond Yields higher in 2018 – The 10-year U.S. treasury bond closed the year at a 2.69% yield, up from 2.40% on December 31, 2017. The 30-year treasury yield ended the year at 3.02%, up from 2.74% on December 31, 2017.Mortgage Rates higher in 2018 – The December 28, 2017 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.55%, up from 3.99% on December 29, 2017. The 30-year fixed rate was over 5% in October before
declining in November and December. The 15-year fixed was 4.01%, up from 3.44% . last December. The 5-year ARM was 4.00%, up from 3.55% at the close of 2017. Fortunately, rates dropped in the final quarter. The 30-year hit 5% in September.

Year over year price gains moderated in 2018 after 7 years of price gains. For the first 7 months of the year we saw the same month year over year price increases of
6-8%, but by years end those prices were just 1.5% above the same month one year earlier – The California Association of Realtors reported that existing home sales
totaled 372,260 in December on a seasonally adjusted annualized basis. That was
down 11.6% from last December. It marked the fewest sales in a month since January 2015. The statewide median price was $557,600, up 1.4% from December 2017.
On a regional basis Los Angeles County’s median-price of $588,140 was up 1.8%
from last December. Orange County had a median price of $785,000, down 0.1%
from December 2017. Ventura County’s median price of $640,000 was down 0.8% from last December. Inventory levels also continued to rise. Active listings have
increased 30% from 2017. The unsold inventory index hit record lows before moving up steadily in the last 9 months of 2018. There was a3.5-month supply of homes
listed in California, up from a 2.5-month supply in December 2017. It should be noted that a “normal market” has a six-month supply of homes listed, so inventory levels
which are well above the all-time lows of 2017 are still at low historical levels.
Los Angeles County had a 3.5-month supply, up from a 2.4-month supply last
December. Orange County had a 4-month supply, down from 2.6 months last
December. Ventura County had a 5.5-month supply, up from a 4-month supply in
December 2017.

April 2, 2016

Economic update for the week ending April 2, 2016

U.S. economy gains 215,000 jobs in March – Employers added 215,000 net new jobs in March. This was considered a healthy number which beat economists’ expectations of 199,000 jobs. Almost all sectors saw healthy job gains with the exception of manufacturing which lost 29,000 jobs. This was a troubling part of the report as it was hoped that manufacturing which has been hurt by a strong dollar and sluggish economic conditions overseas was starting to improve. Nevertheless the report was met positively and stocks rose upon its release. Wages continued to show sluggish growth, rising just 2.3% from last March. It’s unusual to have such strong job growth with such weak wage growth. The unemployment rate ticked up, rising from 4.9% in February to 5% in March. This was actually seen as a positive as more workers entered the workforce who had previously given up on finding a job.

Stocks higher this week – Stocks gained midweek after Fed chairwoman Janet Yellen, commented that The Fed will raise rates at a slow pace. This followed comments last week by members of the Fed’s open market committee that the next rate rise could come this month. Those comments caused bond rates to rise and stocks to fall. Yellen’s comments this week made investors feel rates were not raising soon which caused rates to fall and stocks to rise. The next Fed meeting is April 26 – 27. It will be interesting to see what comes out of that meeting. A strong jobs report also rallied the markets on Friday. The Dow Jones Industrial Average closed the week at 17,972.75, up from 17,515.33 last week. The S&P 500 closed the week at 2,072.78, up from 2,035.94 last week. The NASDAQ closed Friday at 4,914.54, up from 4,773.50 last week.
Bond yields lower for the week – The 10 year U.S. Treasury bond closed Friday yielding 1.79%, down sharply from 1.91% last week. The 30 year U.S. Treasury bond closed Friday yielding 2.62%, down from 2.67% last week. Mortgage rates follow bond yields so we watch bonds carefully.

Mortgage rates -The Freddie Mac Primary Mortgage Survey released on March 31, 2016 showed that average mortgage rates from lenders surveyed for the most popular products were as follows: The 30 year fixed average rate was 3.71%. The 15 year fixed average rate was 2.98%. The 5/1 ARM average was was 2.90%.

Pending home sales rise – The National Association of Realtors announced that pending home sales rose 3.5% in February to the highest level in seven months. The California Association of Realtors released their February pending home sales report. In California pending home sales rose 26.4% from a disappointing January. Year over year pending existing home sales 0.4% below last February’s levels.

March 19, 2016

Economic update for the week ending March 19, 2016

Stocks have another strong week – Stocks gained ground for a fifth straight week. Stock markets have now gained back all the losses suffered in the first 6 weeks of 2016. Earlier in the year stocks were pounded by falling energy stocks due to low oil prices. Those stocks have made back their losses as oil prices have rebounded. Benchmark U.S. Crude oil was $39.44 a barrel Friday, up from a 13 year low of $26 on February 11. Higher oil prices help economies in oil producing regions. Better economic conditions lead to higher spending which helps all sectors of the economy. The price of the dollar has also settled and has dropped about 10% after reaching the strongest levels in decades. This helps the outlook of U.S. exports, as a weaker dollar makes U.S. goods cheaper overseas. Other developments have been that reports on manufacturing, hiring, and construction spending have shown that the U.S. economy is still expanding. The Federal Reserve announced at its meeting this week that there will be fewer interest rate hikes this year than they previously expected. This also helped stocks. The Dow Jones Industrial Average closed the week at 17,602.30, up from 17,213.31 last week. The S&P 500 closed the week at 2,049.58, up from 2,022.19 last week. The NASDAQ closed Friday at 4,795.65, up from 4,748.47 last week.

Bond yields drop after inching up over the last few weeks – The 10 year U.S. Treasury bond closed Friday yielding 1.88%, down from 1.98% last week. The 30 year U.S. Treasury bond closed Friday yielding 2.68%, down from 2.75% last week. Mortgage rates follow bond yields so we watch bonds carefully.

Mortgage rates -The Freddie Mac Primary Mortgage Survey released on March 17, 2016 showed that average mortgage were as follows: The 30 year fixed average rate was 3.73%. The 15 year fixed average rate was 2.99%. The 5/1 ARM average was was 2.93%.

California’s unemployment rate falls to 5.5% – California employers’ added 39,900 non-farm jobs in February according to the Employment Development Department. The 5.5% unemployment rate was an 8 year low, continuing a downward trend.

Southern California home sales jump in February – Data firm CoreLogic reported that a total of 15,373 existing Southern California homes and condominiums were sold in February, up 9.1% from 14,096 in February 2015. Month over month the number of existing home and condominium sales were up 5.1% from January. The median price in the region consisting of Ventura, Los Angeles, Orange, Riverside, San Bernardino and San Diego counties was just 3.7% higher than last February, according to CoreLogic.

Have a great weekend!

March 12, 2016

Economic update for the week ending March 12, 2016

Stocks higher for the fourth straight week – Stock markets are now only slightly down for the year. They have made up the large losses suffered in Janurary and early February. The S&P, for example, is up 11% from its two year low on February 11. This four-week rally has been fueled by better economic data and rising oil prices. Oil prices have risen 47% from their low point just one month ago when U.S. crude oil hit a 13 year low of $26.21 a barrel. Oil prices and stocks have moved in the same direction every week. While low oil prices have hurt many parts of the global and local economy, consumers are benefiting. As gasoline prices rise at the pump it will be interesting to see what happens with retail sales which have been extremely strong, and auto sales that are at all time record highs. These two sectors of consumer spending have been bolstered by low gasoline prices which have given consumers more disposable income. The dollar which has been extremely strong has weakened a bit over the last few weeks. That’s a good sign for manufacturer’s outlook on exports, as a weaker dollar makes U.S. goods less expensive to foreign currencies. The dollar is still quite strong, but off its highs. The Dow Jones Industrial Average closed the week at 17,213.31, up from 17,006.77 last week. The S&P 500 closed the week at 2,022.19, up from 1,999.99 last week. The NASDAQ closed Friday at 4,748.47, up from 4,717.03 last week.

Bond yields higher – Bond yields have inched up over the last few weeks. The 10 year U.S. Treasury bond closed Friday yielding 1.98%, up from 1.88% last week. The 30 year U.S. Treasury bond closed Friday yielding 2.75%, up from 2.70% last week. Mortgage rates follow bond yields so we watch bonds carefully.

Mortgage rates up slightly for second week -The Freddie Mac Primary Mortgage Survey showed that average rates on March 10, 2016 were as follows: The 30 year fixed average rate was 3.68%. The 15 year fixed average rate was 2.96%. The 5/1 ARM average was was 2.92%.

We should start getting February home sales data next week. Stay tuned!

Have a great weekend,

Syd