Rodeo Realty

Stocks markets end March almost unchanged from February – Stocks soared to new heights early in the month. At one point the DOW broke 21,000. Unfortunately for investors, stocks retreated from all time highs early in the month. The Dow Jones Industrial Average on March 31, 2017 was 20,663.22, down from its February 28 close of 20,837.44. The S&P 500 closed the month at 2,362.72 almost unchanged from its February close of 2,369.73. The NASDAQ closed the month at 5,911.74, up from last month’s close of 5,861.90.

Treasury Bond yields end month slightly lower – Despite a rate rise by the Federal Reserve, treasury bonds fell slightly in March. The 10-year Treasury bond closed March 31, 2017 at 2.40%, down from 2.46% at the end of February. The 30-year treasury yield ended the month at 3.02%, down slightly from 3.06% last month.

Mortgage Rates almost unchanged in March – The March 30, 2016 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.14%, just slightly higher than 4.10% on March 4, 2017. The 15 year fixed was 3.39% up slightly from last month’s close of 3.32%. The 5-year ARM was 3.18%, slightly higher than 3.14% on March 4. 

Consumer Confidence at 15 year high – The government reported that consumer confidence in February climbed to the highest level in 15 years. The Monthly Consumer Confidence Survey had the Consumer Confidence Index at the highest level since July 2001.

Federal Reserve raises benchmark rates – The Federal Reserve announced Thursday that they had increased their benchmark interest rates. The 1/4% increase was the second increase in less than 90 days, but just the third increase in a decade. The Federal Funds and Discount Rate, the rate which the Fed charges banks for overnight lending now stands at about 1%. It had dropped to 0 – 1/4% during the recession and stayed at that level until December 2015 when the Fed rose the rate by 1/4%. The economy showed signs of slowing in the first two quarters of 2016, so rate hikes were put on hold. The next increase didn’t happen until December 2016, and the third increase was March 16, 2017. The Fed still expects 2 more increases this year, and stated that the policy still is “accommodative”, and “neutral” would have a rate near 3%. Following the increase banks increased their prime rates by 1/4%, which increased all loans tied to prime like home equity lines of credit, and most business loans. Some banks increased rates paid out to on bank accounts, which will increase adjustable rate mortgages, as those are tied to bank’s cost of funds. The 15, and 30 year fixed actually dropped after the announcement. They had increased over the last two weeks. Higher rates generally mean less inflation. Interest rates fixed for long periods need to be at a higher rate than inflation which they call “the spread” to make a profit. To put is simply, the Fed uses interest rate policy to help the economy when slow by lowering rates. Lower rates make borrowing less expensive to encourage people and companies to borrow more to increase investing. When the economy is so strong that inflation is a risk the Fed increases rates to slow the economy so it doesn’t overheat. Technically that’s not exactly what has happened. What they have done is raise rates and will continue to raise rates to a “neutral rate”, as they dropped rates to the lowest level in history, because the recession was so deep. Now that job growth has been so strong, and we are seeing signs of inflation they don’t feel that historically low rates are needed and are gradually trying to get them to a more neutral level. Without getting rates up they don’t have the valuable tool to drop them if the economy slows, as you can’t go down from zero!

California jobless rate dips to 5% in February, a 10 year low – The Employment Development Department reported that California’s unemployment rate dropped to 5% in February, a 10 year low. 22,900 net new jobs were added in February. Over the last 12 months 315,800 new jobs were added in California, a 1.9% increase. California’s increase in new jobs created outpaced the national job increase pace of 1.6%. The unemployment rate in L.A. County was 4.8%. 

California home sales pace, and prices continue to rise – The number of existing homes sold in California increased 4.7% month over month from January. Year over year the number of homes sold were up 4.9% from February 2017. The median price paid for a home in California was 478,790. The median price represents the point at which 1/2 the homes sell for more, and 1/2 sell for less. Month over month the median actually dropped which we have often seen over the last year, as one month is not a large sample. Month over month the median dropped 2.2% from January. Year over year, which is a better indicator of price movement prices were up up 7.6 in February from February 2016. Inventory increased to a 4 month supply as more homeowners began putting homes on the market. That was up from 3.7 months in January, but down from 4.7 months last February. Inventory levels are also better to compare year over year due to seasonal purposes. 

Low inventory leads to a decline in pending sales of existing homes – The California Association of Realtors reported that new contracts signed for the purchase of existing homes in February declined 2.6% year over year from the number of contracts last February. Month over month pending sales increases 3.2% from January’s pending contract level. It’s best to compare year over year rather than month over month due to seasonal reasons. Pending home sales is an indicator of future closed sales.

U.S. Existing home sales dip from January’s 10 year high pace – prices increase – According to the National Association of Realtors, U.S. Existing home sales dipped 3.7% in February from January’s pace. January marked the highest number of sales in January in almost a decade. Year over year existing home sales were up 5.4% from last February. The median price paid for a home nationally was 7.7% higher in February than it was one year ago. This marked the 60th consecutive month of year over year price gains. 

U.S. Pending home sales surged in February – Pending re-sale home sales increased 5.5% in February from January’s pace, according to data released by The National Association of Realtors. Year over year pending sales were 2.6% above last February’s pace. February’s sales pace was the highest in 11 months.  

U.S. new home sales surge in February – The Commerce Department reported that new home sales rose 6.1% in February from January’s sales pace levels. Year over year new home sales increased a staggering 13% from last February, 2016. The National Association of home Builders / Wells Fargo builder sentiment index rose to its highest reading since June 2005. 

Have a great weekend,
Syd

U.S. Employers add 235,000 jobs in February – The Labor Department reported that 235,000 new jobs were added in February. Experts had expected a gain of 190,000. The unemployment rate dropped to 4.7% down from 4.8% in January. The labor participation rate, which shows the share of working-age people in the workplace, increased to 63% from 62.9% last month. Wages in January grew 2.8% from last February, according to the report.

California unemployment rate drops to 5.1% – The California Employment Development Department reported that California’s unemployment rate dropped to 5.2% in January. The L.A. County unemployment rate also dropped in January to 5%, down from 5.6% in January 2015. Unlike federal jobs numbers, state unemployment numbers lag a month behind.

Stocks decline slightly after 6 weeks of gains – Stocks lost a little ground this week after 6 straight weeks of gains. Speculation of a rate hike by the Federal Reserve next week let to investor’s reluctance in a lackluster week. Energy stocks also declined as oil prices fell after months of gains. Even a better than expected new jobs report didn’t help stocks. Perhaps it even made investors even more apprehensive of a Fed rate hike. The Dow Jones Industrial Average closed the week at 20,908.72, down from last week’s close of 21,005.71. The S&P 500 ended the week at 2,372.60, down from its close of 2,383.12 last week. The NASDAQ closed the week at 5,861.73, down slightly from last week’s close of 5,870.75.

U.S. Treasury Bond yields rise on expectations of a Fed rate hike at next week’s Fed meeting – The 10-year U.S. Treasury Bond closed the week yielding 2.58%, up from 2.49% last Friday. The 30-year Treasury Bond yield closed the week at 3.16%, up from 3.08% last week. Mortgage rates follow bond yields, so we watch treasury bonds closely.

Mortgage rates rise on anticipation of Fed rate hike – The Freddie Mac Primary Mortgage Survey released on March 9, 2017 reported that average mortgage rates from lenders surveyed for the most popular mortgage products were as follows: The 30-year fixed rate average was 4.21%, up from 4.10% last week. The 15-year fixed average rate was 3.42%, up fro. 3.32% last week. The 5/1 ARM average rate was 3.23%, up from 3.14% last week. Rates rose at the end of the week. Next week’s rates will be at least 1/8% higher.

Have a great weekend!

Stocks markets end week at record highs – Stocks surged again this week after reports of stronger retail sales and inflation showed that the U.S. economy was stronger than expected. Europe and Asia also have seen results showing their economies are growing. Their economies had been slowing the last couple of years, which had dragged our stocks down. Oil also has improved. It’s more than $53 a barrel, up from just $28 a barrel last February, a 20-year low. That also dragged down energy, oil, and mining stocks, which are showing strong gains again and economies in oil producing regions. For the week, markets gained 1.5%, which followed a 1% gain last week. The S&P is up over 5% this year. That’s just 45 days! The owner of Rodeo Realty said, “Since the election stock markets are up about 14%. That’s a huge gain. It’s largely based on expectations of a better economy, with higher corporate profits as a result of lower taxes, less regulation, and higher infrastructure and defense spending. While we all expect those things to improve the economy and profits, I find it hard to believe that it will give a big enough boost to sustain these huge stock gains. I’m sticking with Real Estate. I think we have a good way to go. Prices have had a good run, but compared to the highs of 2007, adjusted for even the pathetically low inflation we have had, considering the 10 years of wage growth, even if at such low levels, and that interest rates were around 6% in 2007, home affordability is much higher now.” The Dow Jones Industrial Average closed the week at 20,624.05, up from last week’s close of 20,296.27. The S&P 500 ended the week at 2,351.16, up from its close of 2,316.10 last week. The NASDAQ closed the week at 5,838.58, up from last week’s close of 5,734.13.

U.S. Treasury Bond yields stable this week – The 10-year U.S. Treasury Bond closed the week yielding 2.42%, unchanged from 2.41% last Friday. The 30-year Treasury Bond yield closed the week at 3.03%, almost unchanged from 3.01% last week. Mortgage rates follow bond yields, so we watch treasury bonds closely.

Mortgage rates hold steady – The Freddie Mac Primary Mortgage Survey released on February 16, 2017, reported that average mortgage rates from lenders surveyed for the most popular mortgage products were as follows: The 30-year fixed rate average was 4.15%. The 15-year fixed average rate was 3.35%. The 5/1 ARM average rate was 3.18%.

Economy shows signs of inflation picking up – The prices Americans pay for goods and services surged in January by the largest amount in four years, mostly reflecting a rebound in the cost of gasoline that’s taking a bigger chunk out of household incomes. The government’s reported consumer price index (CPI) showed that consumer prices rose 2.5 percent in January from a year earlier, the highest rate since March 2012. About 1/2 of the rise was attributed to higher gas prices. Rent and medical costs also saw a spike from a year earlier. The seasonally adjusted 0.6% rise in January was double the 0.3% economists predicted. Core inflation which strips out gasoline and food prices rose 0.3% in January and was up 2.3% from last January. We watch inflation because when inflation rises it causes interest rates to rise. Fortunately rates have risen on the expectation of higher inflation, so rates remained steady despite the higher CPI report.

California home closed escrows higher in January – The California Association of Realtors reported that home sales totaled 420,100 in January on a seasonally adjusted basis. The number of sales increased 2.1% from December’s sales pace and 4.4% from last January. Although the median price dropped slightly from December, it was up 4.8% from January 2016’s median. Inventory levels rose to a 3.7 month supply in January from a 2.7 month supply in December as more homeowners put their homes on the market. There was a 4.3 month supply last January.

Stay dry and have a great weekend!
Syd

Stock market indexes reach new record highs – The Dow and S&P closed at record highs on Friday. They both gained about 1% for the week. Stocks rallied on Thursday and Friday following an announcement that a tax reduction plan would be announced in the next few weeks, and an outline of a plan drafted by the chairman of the House Committee of Financial Services, which would remove many regulations in The Dodd Frank Financial Reform Bill passed in 2010. Investors are becoming more optimistic that lower taxes, less regulation, and higher infrastructure spending could fuel faster economic growth. 2016 fourth quarter corporate profits beat estimates by most companies reporting, which provided further optimism. Energy stocks were boosted as well because investors were encouraged to see that OPEC is following through on its commitment to decrease production of oil to increase oil prices. The Dow Jones Industrial Average closed the week at 20,296.37, up from last week’s close of 20,071.46. The S&P 500 ended the week at 2,316.10, up from its close of 2,297.42 last week. The NASDAQ closed the week at 5,734.13, up from last week’s close of 5,666.77.

U.S. Treasury Bond yields lower this week – The 10-year U.S. Treasury Bond closed the week yielding 2.41%, down from 2.49% last Friday. The 30-year Treasury Bond yield closed the week at 3.01%, down from 3.11% last week. Mortgage rates follow bond yields, so we watch treasury bonds closely.  

Mortgage rates hold steady – The Freddie Mac Primary Mortgage Survey released on February 9, 2017 revealed that average mortgage rates from lenders surveyed for the most popular mortgage products were as follows: The 30-year fixed rate average was 4.17%. The 15-year fixed average rate was 3.39%. The 5/1 ARM average rate was 3.21%.

Home sales and prices spike in the fourth quarter of 2016 – The number of homes sold in the fourth quarter of 2016 was 7.1%higher than the fourth quarter of 2015, according to The National Association of Realtors. It was the highest quarterly sales pace of the year and pushed available housing supply to record lows in the final quarter of 2016. Home prices increased at a quicker pace in the final quarter of 2016, up 5.7% from the same quarter one year earlier, which was attributed to more competition for fewer homes. The number of homes for sale nationally in the fourth quarter was down 6.3% from the number of homes for sale in the same quarter of 2015. It marked the fewest number of homes for sale since NAR began tracking available listings. Nationally, there was a 3.9 month supply of homes for sale in the fourth quarter of 2016, down from a 4.6 month supply in the same quarter a year ago. California had a 2.6 month supply in December, according to The California Association of Realtors.  

California fourth quarter housing affordability unchanged from 3rd quarter – The California Association of Realtors reported that 31% of California households could afford to purchase a median price home in the fourth quarter, unchanged from the third quarter and up from 30% in the fourth quarter of 2015. A minimum income of 100,800 was needed to purchase median priced home of $511,360 according to CAR. 40% of households were able to purchase a condominium or town home, which had a median price of $413,700 and needed an annual income of $81,550. They attributed the slight year over year increase in affordability to increases incomes. 

Have a great weekend!
Syd