Rodeo Realty

Economic news this week – This week it looked like interest rates were going to begin to fall. The 10-year bond yield and mortgage rates dropped every day. The 10-year fell to 4.28% from 4.51% last Friday, as it began to appear that the economy was finally slowing. Several key reports were released. The week started off with a report from the Labor Department showing that April Job openings, a measure of labor demand, were down to the lowest level since February 2021.  There were 1.24 openings for every person unemployed in April, down from 1.3 positions for every person unemployed in March, and the lowest since June 2021. Another report showed that manufacturing fell for a second consecutive month in May. Experts felt that manufacturing was struggling with higher interest rates and weaker consumer spending. Disposable personal income fell 0.1% in April, from the previous month. The personal savings rate was 3.6% in April and March, the lowest since December 2022. Also, the Q1 2024 GDP was revised downward from 1.6% to 1.4%, indicating that the economy was finally showing signs of slowing after one of the most aggressive campaigns of interest rate hikes and other tightening measures by the Fed in decades. Consumer spending reports showed that consumer spending finally showed signs of slowing, as retail sales decreased in March and April. Unfortunately, on Friday, a blockbuster May Jobs report was released showing that job growth and wages surged in May. Investors who were beginning to believe that the economy was finally slowing and inflation settling, were shocked by the surge in job growth and wages, and now feel that a rate drop by the Fed is months away. Bond yields and mortgage rates rose sharply on Friday after the jobs report was released. 

U.S. Job growth surged in May – The Department of Labor and Statistics reported that 272,000 new jobs added in May. That shocked experts who expected 165,000-180,000 new jobs. May marked the 41st consecutive month of job growth.  The unemployment rate rose to 4% in May, up from 3.9% in April, ending a 27 straight month streak with the unemployment rate below 4%. That has not happened since the 1960s. Had May’s unemployment remained below 4%, that would have marked the longest streak in history with unemployment under 4%.  After two years of high interest rates it was widely felt that job growth would finally be slowing, but May’s blowout jobs report shocked everyone. Average hourly wages increased 4.1% year-over-year in May, up from a  3.9% year-over-year increase in April.  The Fed is looking to get the unemployment rate up to the mid-4% range in order to slow wage growth to combat inflation. This report will give the Fed pause. At this point it is now if the Fed will bring interest rates down from a 24-year high but when they enter a new phase of rate drops. A blowout jobs report gives the Fed a reason to hold rates steady and not begin the phase of rate reductions yet.

Stock markets – The Dow Jones Industrial Average closed the week at 38,798.99, up 0.3% from 38,686.32 last week. It is up 2.9% year-to-date.  The S&P 500 closed the week at 5,346.99, up 1.3% from 5,277.51 last week.  The S&P is up 12.1% year-to-date. The Nasdaq closed the week at 17,133.13, up 2.4% from 16,735.02 last week. It is up 14.1% year-to-date.

U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 4.43%, down from 4.51% last week. The 30-year treasury bond yield ended the week at 4.55%, down from 4.65% last week. We watch bond yields because mortgage rates follow bond yields. The 10-year was 4.28% on Thursday and shot up to 4.43% Friday after the hot jobs report was released.

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 June 6, 2024, were as follows: The 30-year fixed mortgage rate was 6.99%, down from 7.03% last week. The 15-year fixed was 6.29%, down from 6.36% last week. Rates rose after the jobs report was released on Friday.

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.

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 June 6, 2024, were as follows: The 30-year fixed mortgage rate was 6.99%, down from 7.03% last week. The 15-year fixed was 6.29%, down from 6.36% 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.

It was a tough week for stock markets and interest rates. Stock markets dropped steadily all week before rebounding on Friday, but still ended the week lower. Bond yields and mortgage rates also rose this week on fears that inflation was not dropping as quickly as hoped.  Comments from the Federal Reserve which included the release of their “ Beige Book” that stated that stubborn inflation will keep rates higher for longer than expected earlier in the year was not well received by investors as stocks sold off. One Fed official even stated that there was a possibility of a rate increase if inflation continued to pick up. On Friday the Personal Consumption Index (PCE) was released. It showed that personal-consumption expenditures rose by 2.7% year-over-year in April. That was in line with expectations and indicated that inflation was slowing down and stock markets recovered from some of their steep losses in the final 10 days of the month.Bond yields and mortgage rates dropped slightly. All eyes are on the job market. The May jobs report will be released next Friday. The hope is that hiring continued to slow in May from its torrid pace in March. New unemployment claims remain low and it is feared that the unemployment rate will remain below 4% for a 28^thconsecutive month setting a new record for the country. Such a low unemployment rate is considered a major contributor to inflation by the Federal Reserve, as people with jobs and no fear of losing their job spend more freely which causes price increases. Next Friday we will get the May jobs numbers. That will be an indicator of whether the economy is finally beginning to slow.

 Stock markets – The Dow Jones Industrial Average closed the week at 38,686.32, down 1% from 39,069.59 last week. It is up 2.4% year-to-date.  The S&P 500 closed the week at 5,277.51, down 0.6% from 5,304.72 last week.  The S&P is up 10.7% year-to-date. The Nasdaq closed the week at 16,735.02, down 1.1% from 16,920.80 last week. It is up 11.5% year-to-date.

 U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 4.46%, up from 4.46% last week. The 30-year treasury bond yield ended the week at 4.57, almost unchanged from 4.57% 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 May 30, 2024, were as follows: The 30-year fixed mortgage rate was 7.03%, up from 6.94% last week. The 15-year fixed was 6.36%, up from 6.24% 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.

It was a wild month for both stocks, bond yields and mortgage rates. The month started out with a jobs report showing that hiring was finally showing signs of slowing after picking back up since the start of the year. The CPI (consumer price index) came in at a year-over-year increase of 3.4% in April. That was down from 3.5% in March. Year-over-year the CPI was up 3.1% in January, 3.2% in February and 3.5% in March so an April reading of 3.4% was a welcome relief because  it showed that inflation, which had picked up since the start of the year, may be moderating again.  In the first two weeks of the month stock markets soared with the Dow closing over 40,000 for the first time in history and the NASDAQ hit an all-time high. Unfortunately, in the last two weeks several new indicators have suggested that inflation may still be not moving down as expected. The Fed released its “beige book” which gives their opinion on expectations. In that they stated that inflation was not coming down as steadily as they thought and that it may be a while until they begin cutting rates from 24-year high levels. One Fed governor even stated that there was a possibility of a rate hike. Stock markets dropped from their record highs earlier in the month and bond yields, and mortgage rates moved up on the last 10 days of the month. Fortunately, on Friday May 31, 2024, the Personal Consumption Index (PCE) was released. It showed that personal-consumption expenditures rose by 2.7% year-over-year in April. That was in line with expectations and indicated that inflation was slowing down and stock markets recovered from some of their steep losses in the final 10 days of the month and bond yields and mortgage rates dropped slightly. All eyes are on the job market. The May jobs report will be released next Friday. The hope is that hiring continued to slow in May from its torrid pace in March. New unemployment claims remain low and it is feared that the unemployment rate will remain below 4% for a 28^th consecutive month setting a new record for the country. Such a low unemployment rate is considered a major contributor to inflation by the Federal Reserve, as people with jobs and no fear of losing their job spend more freely which causes price increases. Next Friday we will get the May jobs numbers. That will be an indicator of whether the economy is finally beginning to slow.

Stock Markets – The Dow Jones Industrial Average closed the month at 38,686.32, up 2.3% from 37,815.92 on April 30, 2023. It is up 2.4% year-to-date. The S&P 500 closed the month at 5,277.51, up 4.8% from 5,035.69 last month. It is up 10.7% year-to-date.  The NASDAQ closed the month at 16,735.02, up 6.9% from 15,657.82 last month. It is up 11.4% year-to-date.

U.S. Treasury bond yields – The 10-year treasury bond closed the month yielding 4.51%, down from 4.69% last month. The 30-year treasury bond yield ended the month at 4.65%, down from 4.79% last month. We watch bond yields because mortgage rates often follow treasury 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 April 25, 2024, were as follows: The 30-year fixed mortgage rate was 7.03%, down from 7.17% at the end of April. The 15-year fixed was 6.36%, down from 6.44% last month.

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.

Home sales data is released on the third week of the month for the previous month by the National Association of Realtors and the California Association of Realtors. These are April’s home sales figures.

U.S. existing-home sales – The National Association of Realtors reported that existing-home sales totaled 4.14 million units on a seasonally adjusted annualized rate in April, down 1.95 from an annualized rate of 4.22 million in April  2023.  The median price for a home in the U.S. in April was $407,600, up 5.7% from $385,800 last April. There was a 3.5-month supply of homes for sale in April, up from a 3-month supply one year ago. First-time buyers accounted for 33% 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.

Year-over-year California home prices jumped 11.4% in April.  – The California Association of Realtors reported that existing-home sales totaled 275,540 on a annualized rate in April, up 3% from an annualized rate of 267,470 in March, and up 4.4 from a revised 226,960 homes sold on an annualized basis last April. There was a 2.6-month supply of homes on the market in March, up from a 2.5-month supply one year ago.  The statewide median price paid for a home in April  was $904,210, up 5.8% from $854,490 in March and up 11.4% from a revised median price of $811,520 in April 2023.

The graph below shows sales data by county in Southern California.

Have a great weekend!