| Key economic news in February – Stock prices soared with the Dow and S&P hitting record highs, and the Nasdaq made up most of last year’s losses. Recent reports show that the economy appears to be heating up. 353,000 net new jobs were added in January, nearly double the number that analysts expected. Corporate profits beat estimates almost across the board with tech stocks leading the way. Unfortunately, with the economy so strong the inflation level is not dropping as quickly as economists had hoped. The Consumer Price Index (CPI), which measures consumer prices rose 3.1% from one year ago. Experts had projected a 2.9% increase. The Producer Price Index (PPI) for January, which measures wholesale prices, increased 0.3% month-over-month, its largest increase since last August, and well above the 0.1% increase economists expected. Investors were very optimistic in December and January that the Fed would soon begin to drop their key interest rates from the current 23-year high levels but now feel that a rate drop is months away. Minutes from the latest Fed meeting confirmed that the Fed is in no rush to begin dropping rates. This drove bond yields and mortgage rates higher in February, but they are still well below their peak last October.
Stock Markets – The Dow Jones Industrial Average closed the month at 38,996.39, up 2.2% from 38,150.30 on January 31, 2023. It is up 3.5% year-to-date. The S&P 500 closed the month at 5,096.27, up 5.2% from 4,845.65 last month. It is up 6.9% year-to-date. The NASDAQ closed the month at 16,091.92, up 6.2% from 15,164.01 last month. It is up 7.2% year-to-date. U.S. Treasury bond yields – The 10-year treasury bond closed the month yielding 4.25%, up from 3.99% last month. The 30-year treasury bond yield ended the month at 4.38%, up from 4.22% last month. We watch bond yields because mortgage rates often follow treasury bond yields. Mortgage rates – The Freddie Mac Primary Mortgage Survey reported that mortgage rates as of February 29, 2024, for the most popular loan products were as follows: The 30-year fixed mortgage rate was 6.94%, up from 6.69% at the end of January. The 15-year fixed was 6.26%, up from 5.96% at the end of January. The graph below shows the trajectory of mortgage rates over the past year.
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 January’s home sales figures. U.S. existing-home sales – The National Association of Realtors reported that existing-home sales totaled 4.00 – million units on a seasonally adjusted annualized rate in January, down 4.8% from an annualized rate of 4.20 million in January 2023. The median price for a home in the U.S. in January was 379,100, up 5.1% from $360,800 last January. There was a 3.0-month supply of homes for sale in January, almost unchanged from a 2.9-month supply last January. First-time buyers accounted for 28% of all sales. Investors and second-home purchases accounted for 17% of all sales. All cash purchases accounted for 32% of all sales. Foreclosures and short sales accounted for 2% of all sales. Lower mortgage rates in January were credited to an increase in home sales – The California Association of Realtors reported that existing-home sales totaled 256,160 in January, up 14.4% from 224,000 closed sales in December, and up 5.9% from a revised 241,920 homes sold on an annualized basis last January. There was a 3.2-month supply of homes on the market in January, up from a 2.5-month supply of homes in December, and down from a 3.5-month supply one year ago. The statewide median price paid for a home in January was $788,940, up 5% from a revised median price of $751,700 last January.
The graph below shows sales data by county in Southern California.
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Economic Update | Month Ending February 29, 2024
