Economic Update

California posts strong sales and price increases in 2015 – The California Association of Realtors reported that their preliminary figures indicate that there were 407,060 resale single family homes sold in 2015. That marks a 6.5% increase from 382,720 resales in 2014. There were 9.6% more December sales than November.  November had unusually low closing figures which were attributed to delays caused by implementation of new disclosure requirements. Condominium and townhouse sales were up 25.1% from November and were 10.2% higher than last December.  The statewide median price of a home was $489,310, which was up 2.6% from November and 8% higher than one year ago! The median price is the price in which half the homes sell for more and half sell for less.The unsold inventory index fell in December to a 2.7 month supply of homes, a historically low figure. A normal market had a 6-7 month supply. Such a low supply of inventory could cause prices to spike!

Economic update for the week ending December 5, 2015

211,000 New jobs created in November – The Labor Department reported that 211,000 net new jobs were created in November.  Investors interpreted this robust number as confirmation that the economy is growing at a steady pace.  Wages were also up with the average hourly wage up 4 cents to $25.25 after rising 9 cents an hour in October. Year over year hourly wages were up 2.3% in November from November 2014. This is above the inflation rate, and was interpreted as another positive sign. Theunemployment rate held steady at 5%, a 7 year low. Experts felt that workers are more confident they would find a job because 273,000 more people entered the workplace bringing the labor participation rate up to 62.5%. Another positive sign, yet still a historically low number.

Stocks surge following release of jobs report – Stocks surged Friday after the Labor Department reported that employers added 211,000 jobs in November. The Dow added  367 points for the day, its largest gain since September. This reversed a drop in stocks on Wednesday and Thursday due to lower oil prices, which has oil back down under $40 a barrel, and disappointment in the size of Europe’s newly announced stimulus package. The  Dow Jones Industrial Average closed the week at 17,847.63, up from last week’s close of 17,798.49. The S&P 500 closed the week at  2,091.69, unchanged from last Friday’s close of 2,090.11.  The NASDAQ closed the week at 5,142.27, up from last week’s close of 5,127.53.

Treasury bonds yields unchanged – The 10 year treasury bond yield closed the week at 2.27%, almost unchanged from 2.22%, last Friday.  The 30 year treasury bond yield closed Friday at 3.01%, about the same as last week’s close of 3.00%. Investors feel that a rate hike by the Fed is pretty much “built into” longer term rates. This was evident when the robust jobs report, which pretty much guarantees a Fed rate hike will be announced at the conclusion of the Federal Reserve December 15 – 16 meeting, did not cause rates to rise. It will be the first interest rate hike in nearly 10 years, which is actually a positive sign that the Fed feels that the economy is strong.

Home prices reach an all time high in 2015 in 1/3 of the nation – According to Realty Trac’s October 2015 Home Sales Report, released this week, 33 major metro areas, which was 35% of all 94 metro areas analyzed, reached all time highs in 2015. The number of sales in the first 10 months of the year were up 6%, making the number of sales in the first 10 months of 2015 the highest in 9 years. The median sales price for all 94 areas analyzed was up 1% in October and 10% year over year. October marked the 44th consecutive month of year over year median price increases in their data. In individual areas analyzed, 90% showed increases in their year over year median prices in October over last October.

Mortgage rates unchanged  –  The 30 year fixed rates are around 4.00% for loans up to $417,000, and around 4.25% for loans over $417,000.  The 15 year fixed rate loans are about 3.375% for loans up to $417,000, higher loan amounts have rates that are around 3.5%. 5-Year ARM and 3–Year ARM rates are both around 3.25%.

Economic update for the week ending November 14, 2015

Low spending and inflation data released this week cause stocks to slide – The largest last 12 month drop in producer prices since the depths of the recession, and a weak retail spending report caused investors to pull back on stock purchases ending a rally of  6 straight weeks of  gains.  Stocks also probably suffered from the largest terrorist attacking since 9-11 when a coordinated attack hit Paris yesterday. The Dow dropped 202 points yesterday following the attacks. It was down 665 points for the week. The  Dow Jones Industrial Average closed the week at 17,245.24, down from last week’s close of 17,910.33.   The S&P 500 closed the week at  2,023.04, down from last Friday’s close of 2,099.20.  The NASDAQ closed the week at 4,927.88, down from last week’s close of 5,147.12.

Treasury bonds yields mostly unchanged from last week – Weak inflation and spending data failed to convince investors that the Federal Reserve would hold off on increasing interest rates at the December meeting.  Most investors expect that after October’s strong job growth and wage growth a rate increase is expected. The 10 year Treasury bond yield closed the week at 2.28%, slightly lower than 2.34% last Friday.  The 30 year treasury bond yield closed Friday at 3.06% about the same as last week’s close of 3.09%.

Mortgage rates stable after rising last week –  The 30 year fixed rates are around 4.00% for loans up to $417,000, and around 4.25% for loans over $417,000.  The 15 year fixed rate loans are about 3.375% for loans up to $417,000, higher loan amounts have rates that are around 3.5%. 5-Year ARM and 3–Year ARM rates are both around 3.125%.

Retail sales flat in October – Retail sales rose just 0.1% in Octoberaccording to the Commerce Department. Experts expected a 0.3% increase. Much of the drop was due to poor auto sales which were down 0.5%. Excluding auto sales retail sales grew just 0.2%, still below the amount expected. This is a sign that consumers may be pulling back on their spending, which could affect the 4th quarter GDP figures, which experts had expected would rebound after a disappointing 3rd quarter.

Consumer confidence higher than one month ago – The University of Michigan consumer sentiment index rose from 90.0 in October to 93.1 in early November. The report showed that consumers plan to increase spending slightly compared to those surveyed last month. This report did little to ease investors concerns about slowing growth in recent months.

Producer prices continue to fall – The Labor Department reported that its producer price index fell 0.4% in in October. For the 12 months ending October the PPI fell 1.6%, the largest decline in producer prices since the depths of the recession for a 12 month period ending in 2009. The Producer Price Index is a weighted index of prices measured within the wholesale markets, manufacturing industries, and commodities markets.

Economic update for the week ending November 7, 2105

U.S. employers add 271,000 jobs – The Labor Department reported that U.S. Employers added 271,000 non-farm jobs in October.  It was the most robust job growth in 10 months which caught experts by surprise after 2 months of disappointing job growth, and a weak third quarter GDP growth figure released just last week. Experts expectations were 150,000 jobs so 271,000 blew analysts away. The unemployment rate fell to 5%, its lowest level since April 2008. Even more positive was wage growth which has been below the targeted growth rate desired by The Fed. Average hourly wages were up 0.4% in October from September. For the last 12 months wages are up 2.5% from last October. 

Stock markets rise for a 6th straight week of gains – Stocks have recovered nicely from the market’s steep slides in August and September.  That slide was termed a “correction” which is defined as a drop of 10% or more. The sharp rebound was fueled by strong 3rd quarter corporate earnings by U.S. Companies which beat expectations and positive signs in Europe and Asia.  Those included economic stimulus to boost their economies like the measures we took during the recession. The  Dow Jones Industrial Average closed the week at 17,910.33, up from last week’s close of 17,663.54.  The S&P 500 closed the week at  2,099.20, up from last Friday’s close of 2,079.36.  The NASDAQ closed the week at 5,147.12,  up from last week’s close of 5,053.75.

Treasury bonds yields rise after job report shows robust growth  – A very strong jobs report showing that the economy added 271,000 jobs, almost double what analysts expected, caused investors to fear that The Federal Reserve would raise interest rates at the December policy meeting.  It will be the first rate increase since 2006 if The Fed follows through. Even if they do raise rates experts believe that they won’t go too high or rise very quickly. Rates on bonds and mortgages rose after the jobs figures were announced. The 10 year Treasury bond yield closed the week at 2.34%, up from 2.16% last Friday.  The 30 year treasury bond yield closed Friday at 3.09%, up from last week’s close of 2.96%.

Mortgage rates inch up slightly this week –   The 30 year fixed rates are around4.00% for loans up to $417,000, and around4.25% for loans over $417,000.  The 15 year fixed rate loans are about 3.375% for loans up to $417,000, higher loan amounts have rates that are around 3.5%. 5-Year ARM and 3–Year ARM rates are both around 3.125%.

Have a great weekend!

Economic update for the week ending October 24, 2015

After fourth straight week of gains stocks have made up most of the losses from their August  and September slide – Higher then expected third quarter corporate earnings showed that slowing in Asia and Europe, a strong dollar, and low oil prices have not led to slowing in the U.S. which would have affected corporate profits. NAR also reported that real estate sales rebounded in September after slumping in August. China’s central bank, The People’s Bank of China, announced another 1/4% drop in its key 1 year rate, its sixth rate cut since last November, to spur growth. This was a surprise move as their 3rd quarter GDP beat analysts expectations, yet was slightly below the People’s Bank’s target rate.  The European Central Bank also announced that it would extend its monetary easing program to further stimulate the economy.  These moves were both well received by investors.  The Dow Jones Industrial Average closed the week at 17,646.70, up from last week’s close of 17,215.97. The S&P 500 closed the week at  2,075.15, up 2.1%from last Friday’s close of 2,033.13. The NASDAQ closed the week at 5,031.86, up 3% from last week’s close of 4,886.69.

Treasury bonds yields drop this week – The 10 year Treasury bond yield closed the week at 2.09%,  slightly up from 2.04% last Friday.  The 30 year treasury bond yield closed Friday at 2.90%, almost the same as last week’s close of 2.87%.

Mortgage rates unchanged this week –  They remain at lows of the year –  The 30 year fixed rates are around 3.75% for loans up to $417,000, and around 4.00%  for loans over $417,000.  The 15 year fixed rate loans are about 3.20% for loans up to $417,000, higher loan amounts have rates that are around 3.375%. 5-Year ARM and 3–Year ARM rates are both around 3.00%.

U.S. existing home sales rebound in September – The National Association of Realtors reported that home sales for existing homes which includes resale single-family, condominiums, town homes, and co-ops increased 4.7% in September from August. On an annual rate the number of sales are up 8.8% for the 12 months ending September compared the same period ending September 2014.  The median price was up 6.1% nationwide in September from September 2014, marking the 43rd consecutive month of year over year price increases. This was welcome news for the real estate market as experts were rattled by an unexpected decline in sales in in August. In the Western U.S. the number of  September sales increased 6.7% in September and increased 9.5% from the number of sales one year ago. The median price was also 8% above last year’s levels.

Southern California home prices dip slightly in September – CoreLogic/DataQuick reported that the median price paid for a home in Southern California fell 0.7% in September from August. September sales prices were 6.1% above September 2014.

Economic Update for the month ending September 2015 and update for the week ending October 3, 2015

September month end – Stocks stabilize in September after dropping sharply in August – Although the economy showed the pace of growth slowing in September the stock markets stabilized, after dropping sharply in August on fears of weakness in China, the world’s second largest economy. The Dow Jones Industrial Average closed the month at 16,284.70, down  from 16,528.03 on August 31.   The S&P 500 closed the month at 1,920.03, down from 1,972.18 at the end of August. The NASDAQ closed the month of September at 4,620.17, down from 4,776.51 on August 31.

For the week ending October 3, 2015 –On Friday October 2 the September jobs report was released. It showed that the economy gained far fewer jobs in September than experts expected. Although this report was very disappointing the one thing it did was calm investors’ fears of how soon and how much the Federal Reserve would rise interest rates. Rates dropped on bonds and mortgages and stocks rose on Friday after the report was released. The Dow Jones Industrial Average closed the week at 16,472.37, up from last week’s close of 16,314.67.  The S&P 500 closed the week at  1,951.36, up from last Friday’s close of 1,931.34. The NASDAQ closed the week at 4,707.78, up from last week’s close of 4,686.50.

September 30 Month end -Treasury Bond yields drop in September – The 10 year Treasury bond yield closed the month at 2.06%, down from August’s close of 2.21%.  The 30 year treasury bond yield closed on September 30, at 2.87%, down from August’s close of 2.95%.

For the week ending October 3, 2015 – Treasury Bond yields much lower this week following weak jobs report – The 10 year Treasury bond yield closed week at 1.99%, down from 2.17% last Friday.  The 30 year treasury bond yield closed Fridayat 2.82%, down from last week’s close of 2.96%.

Mortgage Rates fall in September – Rates for October 2, 2015 –  The 30 year fixed rates are around 3.75% for loans up to $417,000, and around 3.875% for loans over $417,000.  The 15 year fixed rate loans are about 3.00% for loans up to $417,000, higher loan amounts have rates that are around 3.25%. 5 Year-ARM and 3–Year ARM rate are both around 3.00%.

U.S. Employers add 142,000 jobs in September  – unemployment rate unchanged at 5.1% – The Labor Department reported that US employers added 142,000 non-farm new jobs in September.  The unemployment rate remained at 5.1%, its lowest level since  2008. It was a disappointing report as 203,000 new jobs were expected by experts. This was the second straight month that job growth fell well below expectations, as August was revised down to 136,000 jobs added from 172,000. Many experts feel that the Fed’s decision not to raise interest rates is better understood as the last two months have been the weakest in several years.  Average hourly wages also fell for the first time this year after looking in July and August that wage growth was beginning to tick up. Wage growth is well below the Fed’s target rate for healthy growth. This was a bad report in every way, except for interest rates which dropped to the lowest levels of the year. The report shows that falling oil prices, a strong dollar, weakness in China and Europe are beginning to cause slowing in the U.S.. The energy sector lost 12,000 net new jobs in September, after losing 9,000 in August, bringing the total loss of energy sector jobs to 100,000 so far this year, as a result of falling oil prices.  Weakness in China, and the strong dollar has caused exports to fall. Exports were down over 5% for the year ending July and are forecasted to be down nearly 10% in August from a year ago.  This has caused manufacturing to shed 9,000 jobs in September, after losing 18,000 jobs in August. Experts feel that this report will surely give The Fed something to think about when they decide whether or not to raise their benchmark rates from near 0% where they have been since 2008 in an attempt to stimulate the economy.

California employers add 36,200 non-farm jobs – The state’s unemployment rate dropped to 6.1% in August from 6.2% in July. Unemployment is at its lowest level since January 2008 in California according to the Bureau of Labor Statistics. Since August of 2014 the state has gained 470,000 jobs. That represents an annual growth rate of 3% which has outpaced the national average of 2.1% for the 50 states.

Consumer confidence reading edges up in September- The University of Michigan final reading on consumer sentiment for September moved higher. It ended the month at a reading of 87.2 from an initial reading of 85.7 at the beginning of the month. The average reading since its inception has been 85.3. The average reading during the 5 recessions since its inception has been 69.3. During non-recessionary years the average reading has been 87.5, which is right about where we are. Consumer sentiment is important because consumer confidence is so closely tied to consumer spending which accounts for nearly a third of the economy.

Second quarter GDP revised upward – The Commerce Department said Friday that the second quarter gross domestic product showed a growth rate of 3.9%. This was higher than their initial estimate of 3.7%. The Commerce Department also saidFriday that consumer spending rose 3.6% during the quarter up from an initial estimate of 3.1%.

Important gages of inflation show no threat of inflation  – The Labor Department said that its Producer Price Index was unchanged in August after gaining 0.2% in July. In the past 12 months ending in August the Producer Price Index has shown producer prices declining 0.8%, the 7th straight past 12 month decrease in the index. This is mostly attributed to lower energy costs due to falling oil prices, and low import costs due to a stronger dollar. It should be noted that while producers of goods and services are seeing prices actually fall. The Consumer Price Index also declined 0.1% August after increasing 0.1% in July, according to the Labor Department. Falling prices, also called deflation is also something that is a sign of slowing in the economy. The Fed’s target rate for inflation is 2%. So far this year we have been well below that.

Pending home sales decline in August, but numbers are still above last year’s levels – The California Association of Realtors reported that pending home sales fall 8.7% in August from July. While monthly pending home sales were down, year over year pending home sales in August were still up 12.8% from August 2014.  It was the 10th straight month of year over year increases in the number of pending sales, and the 7th straight month of double-digit year-to-year gains.

California existing home sales and prices beginning to level – The California Association of Realtors reported that the number of homes sold in August dropped 3.8% on an annualized level from the number of homes sold in July. Sales were still up 9.3% from the annualized number of homes sold last August. This year the number of sales have been much higher than last year which was the lowest number of sales in decades, but those increases did moderate in August. Prices are beginning to level as well, according to The California Association of Realtors. The statewide median price in August was up 1% from July, and up only 2.5% from August 2014. That marks the lowest year over year price increase in 3 1/2 years. Unsold inventory ticked up to a 3.6 month supply from a 3.3 month supply in July. This is still a very low number. A normal market has a 6-7 month supply. It’s unusual to see prices stabilize with such a low number of homes on the market. The assumption is that prices have risen to a level that buyers have pulled back on their home purchases. Either inventory can rise quickly or prices can begin to rise more quickly in this environment. Unfortunately, we won’t know for sure until one or the other happens!

Economic Update for the week ending September 26, 2015

Stocks rally on Friday to end the week just slightly down – The stock markets have been volatile for the last six weeks mostly due to worries about the effects from slowing growth in China, European weakness, and and uncertainty about the outlook for interest rates. Early in the week markets dropped as more data came in showing China’s economy has continued to slow. One report Wednesday showed that their manufacturing had slowed to the lowest level in 6 years, during the peak of the financial crisis. However; stocks made up much of their loses on Friday after the Commerce Department reported that 2nd quarter GDP had been revised upward, consumer spending was revised upward, and Fed Chairperson Janet Yellen gave a more optimistic view of the economy. Her assessment included that The Fed does still intent to raise rates this year.  Uncertainty over rates, and The Fed’s decision last week to leave rates at near zero levels, made experts fear that The Fed felt the economy was weaker than experts believe. Janet Yellen’s speech at the University of Massachusetts yesterday seemed to put investors’ minds at ease when she reiterated that growth was strong and that a rate increase was coming. US airlines also reported that profits were up 53% in the second quarter mostly due to lower fuel prices and steady travel demand. It is the best year for the airlines since 2007. The Dow Jones Industrial Average closed the week at 16,314.67, almost unchanged from last week’s close of 16,384.79.  The S&P 500 closed the week at  1,931.34, down slightly from last Friday’s close of 1,958.03. The NASDAQ closed the week at 4,686.50, down from last week’s close of 4,827.23. 

Mortgage rates just under 4%  –  The 30 year fixed rates ended the week around 3.875% for loans up to $417,000, and around 4.00% for loans over $417,000.  The 15 year fixed rate loans are about 3.25% for loans up to $417,000, and around 3.375% for loans over $417,000. The 5 Year-ARM rate is around 3.00%  and 1 Year-ARM mortgages are about 2.50%.  

Primary Mortgage Market Survey^®

Freddie Mac surveys lenders each week on the rates, fees and points for the most popular mortgage products.

Next Rate Update on October 1, 2015

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Freddie Mac Multi-Indicator Market Index®

MiMi measures the stability of local housing activity by combining current local market data with Freddie Mac data for all states, the top 100 metros, and the nation.

Treasury Bond yields slightly lower this week – The 10 year Treasury bond yield closed week at 2.17%, up slightly from 2.13% last Friday.  The 30 year treasury bond yield closedFriday at 2.96%, almost unchanged from last week’s close of 2.93%. Mortgage rates follow bond yields so these are closely watched.

Consumer confidence reading the edges up in September- The University of Michigan final reading on consumer sentiment for September moved higher. It ended the month at a reading of 87.2 from an initial reading of 85.7 at the beginning of the month. The average reading since its inception has been 85.3. The average reading during the 5 recessions since its inception has been 69.3. During non-recessionary years the average reading has been 87.5, which is right about where we are. Consumer sentiment is important because consumer confidence is so closely tied to consumer spending which accounts for nearly a third of the economy.

Second quarter GDP revised upward – The Commerce Department said Friday that the second quarter gross domestic product showed a growth rate of 3.9%. This was higher than their initial estimate of 3.7%. The Commerce Department also said Friday that consumer spending rose 3.6% during the quarter up from an initial estimate of 3.1%.

Pending home sales decline in August, but numbers are still above last year’s levels – The California Association of Realtors reported that pending home sales fall 8.7% in Augustfrom July. While monthly pending home sales were down, year over year pending home sales in August were still up 12.8% from August 2014.  It was the 10th straight month of year over year increases in the number of pending sales, and the 7th straight month of double-digit year-to-year gains.

Economic update for the week ending September 19, 2015

Stocks drop after Fed leaves rates unchanged – Stocks were up this week until the Federal Reserve left rates unchanged. Many investors feared a rate increase because higher rates increase borrowing costs which cut into profits. It has been widely felt that the Federal Reserve would have begun rising rates because the economy was on solid footing. Stocks had dropped over the past couple of months partially on fears on a rate increase; however, stocks dropped further when the Fed announced they were not going to increase rates! The Fed’s statement made investors feel the economy was weaker than the data indicates, fearing that future growth may not materialize as expected. The Dow Jones Industrial Average closed the week at 16,384.79, down from last week’s close of 16,433.09  The S&P 500 closed the week at  1,958.03, almost unchanged from last Friday’s close of 1,961.05. The NASDAQ closed the week at 4,827.23, also just about the same as last week’s close of 4,822.34.

Federal Reserve leaves rates unchanged – The Fed chose to leave rates unchanged. In one sense this was good news for investors that had expected the first rate increase since 2006. However, this decision, and their statement spooked investors. The Fed’s statement included that The U.S. was currently the worlds strongest economy, but the risk to future growth in the economy is very high due to weakness throughout the world. It further ran through a bunch of data that showed why they are concerned. Some included: a drop in exports, inflation well below the 2% target range, a stabilizing housing market, and stagnant wages. Strong employment growth was cited as a positive. They left room to raise rates as soon as the next meeting, but added that with inflation so low that even if they did begin to raise rates they would keep rates lower than “normal levels” for a prolonged period of time due to low inflation which they said could persist for as long as a decade. Many experts took these statements to mean that the economy was not as strong as they thought. Stocks sold off on Thursday and Fridayafter the report was digested on fears that The Fed fears the economy may weaken.  This would affect sales which would affect future corporate profits. All in all, the one thing that investors agreed upon is that the Fed’s decision not to raise rates, which have been at near zero since 2008 to stimulate the economy, creates an environment of uncertainty. Markets fear uncertainty.

Mortgage just under 4%  –  The 30 year fixed rates ended the week around 3.875% for loans up to $417,000, and around 4.00% for loans over $417,000.  The 15 year fixed rate loans are about 3.25% for loans up to $417,000, and around 3.375% for loans over $417,000. The 5 Year-ARM rate is around 2.75% and 1 Year-ARM mortgages are about 2.50%. 

Treasury Bond yields slightly lower this week – The 10 year Treasury bond yield closed week at 2.13%, down from 2.20% last Friday.  The 30 year treasury bond yield closed Fridayat 2.93%, almost unchanged from last week’s close of 2.95%. Mortgage rates follow bond yields so these are closely watched.

California employers add 36,200 non-farm jobs – The state’s unemployment rate dropped to 6.1% in August from 6.2% in July. Unemployment is at its lowest level since January 2008 in California according to the Bureau of Labor Statistics. Since August of 2014 the state has gained 470,000 jobs. That represents an annual growth rate of 3% which has outpaced the national average of 2.1% for the 50 states.

California existing home sales and prices beginning to level – The California Association of Realtors reported that the number of homes sold in August dropped 3.8% on an annualized level from the number of homes sold in July. Sales were still up 9.3% from the annualized number of homes sold last August. This year the number of sales have been much higher than last year which was the lowest number of sales in decades, but those increases did moderate in August. Prices are beginning to level as well, according to The California Association of Realtors. The statewide median price in August was up 1% from July, and up only 2.5% from August 2014. That marks the lowest year over year price increase in 3 1/2 years. Unsold inventory ticked up to a 3.6 month supply from a 3.3 month supply in July. This is still a very low number. A normal market has a 6-7 month supply. It’s unusual to see prices stabilize with such a low number of homes on the market. The assumption is that prices have risen to a level that buyers have pulled back on their home purchases. Either inventory can rise quickly or prices can begin to rise more quickly in this environment. Unfortunately, we won’t know for sure until one or the other happens!

Economic update September 12, 2015

Will the Fed raise rates? Federal reserve meeting next week – The Fed will be meeting Wednesday and Thursday to discuss monetary policy.  On Thursday at 11:00 AM Pacific Time they will announce whether or not they will make their first interest rate increase since 2006. The Fed controls the Discount Rate and Federal Funds Rate.  These rates are overnight rates they charge lending institutions. These are short term rates. When the Fed rises or lowers these rates banks follow with similar increases or decreases to their “prime rates”.  The prime, the rate banks charge their best customers, is at a higher rate than they pay and the spread is their profit.  The Fed began lowering interest rates in 2007 in an attempt to make borrowing costs less expensive to encourage companies and people to borrow more money to spur the economy.  Unfortunately, these rate reductions did not work quickly enough.  They continued to lower rates for almost a year, as the country slipped further into recession. By the end of 2008 their benchmark rates were near zero percent. A rate that has never before been offered by the Federal Reserve. After that, lowering rates was no longer an option as you can’t go lower than zero!  Next they used other methods that had never been attempted. Some of those included purchasing treasury bonds and mortgage securities to lower long term rates. The Fed purchased trillions of dollars of mortgages and treasury bonds before tapering down the buying which ended in 2014.  At one point they were buying $85 billion a month worth of treasuries and mortgages which did bring down mortgage rates to the lowest levels in 50 years.  As the country had emerged from recession and had seen solid job growth the bond and mortgage buying was tapered down slowly until the program ended. That was over a year ago. Experts feel, and the Fed has stated, that because the  unemployment level has dropped nearly to half of what it was in the peak of The Great Recession and growth is more solid leaving fed rates near zero is no longer necessary, and an increase is coming.  It was widely speculated that this rise would come at next week’s meeting, but as other risks to the economy have emerged it is possible the Fed will wait. If the Fed does raise rates it will be the first rise in almost a decade. The stock market has reacted badly to an impending rate rise, but many experts feel that going from near zero to 1/4% is really no big deal and fear is an overreaction. It’s a tough decision for The Fed. Employment news is good, wages showed an uptick in August, auto, home and retail sales have been strong. These factors point to a no-brainier that an interest rate rise is overdue. On the other hand: Inflation is nonexistent. Consumer confidence is dropping. The dollar has risen 17.5% against the currencies of the U.S.’s main trading partners, making our exports more expensive. China, the world’s second largest economy, is in the midst of a slowdown. These all pose a risk to the economy. That’s normally a no-brainer to not raise rates! We will know at 11 AM Thursday either way!

To say the stock markets have been volatile is an understatement! – Next week all eyes will be on the Federal Reserve and their decision to raise rates or leave them at historic near zero levels. A rate rise would increase borrowing costs which could impact corporate profits.  Once the Fed does begin to increase they will probably increase them over a long period of time in very slight increments to get to more normal levels. With inflation below the Fed’s target levels nobody expects them to rise to much before they level out. Low interest rates are bad for seniors, and others who depend on interest income, so a rate rise is not all bad. Many investors want to see rates rise already just to get rid of uncertainty. They are growing tired of fluctuations based on speculation on when the Fed will start raising rates. The same thing happened when The Fed tapered down its bond and mortgage buying program. When it ended bond and mortgage purchases, long term rates rose a full percent, and within a couple months they dropped back down to just above where they were. Other factors to watch are: China’s economy, stock markets and currency which have appeared to stabilize after a drastic decline. Oil prices which have moved off their multi year lows just a couple weeks ago, which has caused nearly 100,000 job loses in the energy sector, and has cut energy companies’ profits. A strong U.S. Dollar which makes our goods (exports) more expensive overseas and foreign goods (imports) less expensive to here, which has stabilized.  The Dow Jones Industrial Average closed the week at 16,433.09, up from last week’s close of 16,102.38.  The S&P 500 closed the week at  1,961.05, up from last Friday’s close of 1,921.22.  The NASDAQ closed the week at 4,822.34 up from last week’s close of 4,683.92.

Mortgage rates remain around 4%  –  The 30 year fixed rates ended the week around 3.875% for loans up to $417,000, and around 4.00% for loans over $417,000.  The 15 year fixed rate loans are about 3.25% for loans up to $417,000, higher loan amounts have rates that are around 3.375%. The 5 Year-ARM rate is around 2.75% and 1 Year-ARM mortgages are about 2.50%. 

Treasury Bond yields slightly higher this week – The 10 year Treasury bond yield closed week at 2.20%, up from 2.13% last Friday.  The 30 year treasury bond yield closed Friday at 2.95%, up slightly from last week’s close of 2.89%.

Important gage of inflation shows no threat  – The Labor Department said that its Producer Price Index was unchanged in August after gaining 0.2% in July. In the past 12 months ending in August the Producer Price Index has shown producer prices declining 0.8%, the 7th strait past 12 month decrease in the index. This is mostly attributed to lower energy costs due to falling oil prices, and low import costs due to a stronger dollar. It should be noted that while producers of goods and services are seeing prices actually fall a tad, consumers are seeing prices increase. However, those increases are well below the Fed’s target rate of 2%. The Consumer Price Index is index used for consumer’s prices. It will be out later in the month.

Consumer sentiment slips in early September – The University of Michigan preliminary September reading unexpectedly fell more sharply in September to the lowest level in over a year. This is important because consumer spending, which has been strong, accounts for almost 3/4 of the U.S. Economy.  The fear is that when consumers are less optimistic about the economy they spend less. Up to now consumers have been spending at a very healthy level, but if sentiment keeps dropping that could change.

Economic update for the week ending September 5, 2015

Economy adds 173,000 net new jobs in August- The Labor Department Reported that the economy added 173,000 new non-farm jobs in August.  This was below the 220,000 jobs expected. The unemployment fell to 5.1%, its lowest level in 7 years.That is down from 5.3% last month and has dropped nearly in half since peaking during the recession.  The most positive part of the report was that wages, that have been stagnant, rose 8 cents an hour in August following a 6 cent an hour rise in average wages in July. This was welcome news after June’s number showed that the April, May, June quarter had the lowest wage growth in over 30 years. August’s figure shows wage growth of 2.2% over the last 12 months, which is well over the inflation rate.

Stocks down again this week – Fears of China’s slowdown and a possible interest rate hike by the Fed spooked the markets. More bad economic data from China showed their economy slipping further. At the same time U.S. G.D.P. rose 3.7%, which was better than expected. The August jobs number showed fewer new jobs than expected, yet the unemployment rate fell to near pre-recession levels, and wages, which have been stagnant, rose more than expected. Auto sales were strong, another sign that U.S. consumers are spending money. The Federal Reserve Beige Book, the Fed’s assessment of the strength of the economy, showed that they felt that the economy was growing at a “modest to moderate pace” and that the Chinese slowdown is havering a “only a moderate affect on  the U.S. economy.” This again got investors fearing an interest rate hike by the Fed. Some fear that the first rate hike since 2006 could happen as soon as it’s September 16th – 17th meeting. This was also a drag on stocks. The Dow Jones Industrial Average closed the week at 16,102.38, down from last week’s close of 16,643.01. The S&P 500 closed the week at  1,921.22, down from last Friday’s close of 1,988.87.  The NASDAQ closed the week at 4,683.92, down from last week’s close of 4,828.33.

Mortgage rates remain near lows for the year   –  The 30 year fixed rates ended the week around 3.875% for loans up to $417,000, and around 4.00% for loans over $417,000.  The 15 year fixed rate loans are about 3.25% for loans up to $417,000, higher loan amounts have rates that are around 3.375%. The 5 Year-ARM rate is around 2.75% and 1 Year-ARM mortgages are about 2.50%. 

Treasury Bond yields rose from lows early in the week and closed higher than last week – Investors bought stocks and pulled money from the safety of U.S Treasury Bonds pushing yields up from Monday’s lowest point in over a year. The 10 year Treasury bond yield closed week at 2.13%, almost unchanged from 2.19% last Friday.  The 5 year was under 2% at one point on Monday. The 30 year treasury bond yield closed Friday at 2.89%, down slightly from last week’s close of 2.92%.

U.S. Bank’s earnings rise – The FDIC reported that profits from U.S. Banks rose 7.3% in the second quarter of 2015. The number of “problem banks” continued to fall. Only 5.6% of all banks were not profitable. This was by far the most healthy banks have been since the financial crisis which began in 2007.

Factory orders higher – Orders from U.S. Factories posted a modest gain in July according to The Commerce Department. Factory orders were up 0.4% in July. This was not as good as June’s 2.2% increase, but it did build on that increase.

Economic update for the week ending August, 21, 2015

Stocks down sharply this week – DOW loses over 1,000 points for the week – Stocks dropped sharply this week as overseas markets and commodities fell sharply. China, the world’s second largest economy, showed signs that their slowdown was deeper than previously reported. Following the Chinese Government’s sharp devaluation of the yuan last week to spur investment and to make Chinese goods cheaper overseas more financial data showed that the Chinese economy was worse than anyone thought. Friday, a Chinese Manufacturing Index stood at its lowest level since March 2009, the depths of the financial crises. Following that reading U.S stocks dropped sharply in their worst day since 2011. Oil dropped further falling below $40 per barrel. A level not seen in 6 1/2 years during the depths of the Great Recession. This continued to hit energy companies’ stocks hard. At the same time Greece asked for another bailout, which hit European markets. News at home with the exception of energy, and companies with exposure to China, and stocks were positive. This included: higher existing home sales, high builder confidence, and above expected second quarter sales reported by some retailers. A Federal Reserve report released Thursday showed that The Fed is very cautious of just how fragile the U.S. Economy is, citing spill over from China’s slowing, energy sector profit and job loss, a strong dollar which will hurt exports to already slowing overseas markets, and inflation levels at only 2% annual levels, well below the 3% target. A sign that an interest rate hike may not occur as soon as perviously expected.

The Dow Jones Industrial Average dropped 162 points on Wednesday, 358 points on Thursday and 531 points on Friday. It closed the week at 16,456.75, down over 1,000 points from last week’s close of 17,477.40.  The S&P 500 closed the week at  1,970.89, down from last Friday’s close of 2,091.54.  The NASDAQ closed the week at 4,706.04, also down sharply from last week’s close of 5,048.23.

Mortgage rates fall to lowest levels of the year   –  The 30 year fixed rates ended the week around 3.75% for loans up to $417,000, and around 3.875% for loans over $417,000.  The 15 year fixed rate loans are about 3.125% for loans up to $417,000, higher loan amounts have rates that are around 3.25%. The 5 Year-ARM rate is around 2.75% and 1 Year-ARM mortgages are under 2.50%.

Treasury Bond yields drop this week – Investors fled stocks and moved to the safety of U.S Treasury Bonds pushing yields down to the lowest levels of the year. The 10 year Treasury bond yield closed week at2.05%, down from 2.20% last Friday.  The 30 year treasury bond yield closed Friday at 2.74%, down from last week’s close of 2.84%.

California home sales at 9-year high – CoreLogic reported that existing home sales in July hit a 9 year high.  The number of homes sold in July increased 16.9% from last July. Home prices were also higher with the median price up 5.5% year over year. The California Association of Realtors reported that sales were up 2.7% from June and 12.7% from July 2014. CAR reported that prices were up 5.4% year over year. Housing remained at a 3.3 month supply, well below normal levels of 6 a 7 months. CoreLogic uses information from recorded sales at counties throughout the state, while The California Association of Realtors uses reported sales from its Realtor members.

U.S. home sales at highest rate since February 2007 – The National Association of Realtors reportedThursday that existing home sales rose 2% in July. Home sales in July were at at their highest level since February  2007 on an annualized basis.

Home builders index shows homeowners and builders are the most optimistic in over a decade – TheNational Association of Home Builders reported that the confidence level of homeowners to home builders rose to its highest reading since November 2005.

Economic update for the week ending July 11,  2015

Stocks had a wild week – Stocks dropped early In the week as fears of Greek’s failed debt talks, and the results of a vote to turn down the reforms proposed by creditors were announced. Thursday and Friday it appeared that a deal was in sight. No deal by next week could cause Greece to leave the Euro. This could cause slowing throughout Europe, experts say. A new deal that has been approved by the Greek Prime Minister and Parliament which would include a new 3 year loan is now with the European Union for approval. After a two week shut down of Greek banks, Greece has now agreed to many of the reforms that they would not do just a couple of weeks ago. It’s not all the reforms that the European Union were looking for, but it is a good compromise, which experts may will end the crisis. Chinese Stocks have dropped over 30% this year. Their markets recovered a little at week’s end. All this caused stocks to fall early in the week, and riseThursday and Friday. The Dow Jones Industrial Average closed the week at 17,760.41, slightly higher than last week’s close of 17,730.11.  The S&P 500 closed the week at 2,076.62, unchanged from last week’s close of 2,076.68. The Nasdaq closed Friday at 4,997.70, down slightly from last week’s close of 5,009.21.

Treasury Bond yields end volatile week unchanged from last week –  Several factors caused rates of fluctuate this week. Greece looked like a deal to keep them from leaving the Euro would not happen early in the week, but progress was made Thursday and Friday. China’s stock markets, which are down about 30% for the year improved on Thursday and Friday. Janet Yellen said Friday that a rate hike by the Fed this year is still expected. Interest rates dropped early in the week. The 10 year treasury closed Wednesday at 2.22%, its lowest level in several weeks, before jumping back almost 1/4% Thursday and Friday. The 10 year Treasury bond yield closed the week at 2.42%, just above last week’s close of 2.40%. The 30 year treasury bond yield closed Friday at 3.20%, almost unchanged from 3.19% last week.

Mortgage Rates end week the same as last Friday –  After dropping almost a quarter of a percent byWednesday, rates rose nearly a quarter percent on Thursday and Friday to end the week back were they were last week. The 30 year fixed rates ended the month around 4.10% for loans up to $417,000, and around 4.375% for loans over $417,000.  The 15 year fixed rate loans are about 3.375% for loans up to $417,000, higher loan amounts have rates that are around 3.50%. 5 Year-ARM rate is around 3.00% and 1 Year-ARM mortgages are around 2.75%.

Federal Reserve gives mixed messages – Minutes released Wednesday from the Fed’s June meetingshowed that just one of the ten voting members were in favor of raising interest rates.        With strong job gains and unemployment at a 7 year low it is widely felt a rise is coming.  The report indicated that the Fed wanted to wait and see what effect a Greece default,  slowing in Europe, a significant drop in the Chinese stock market, and a strong dollar would have on growth here at home. Earlier in the year there were more voting members in favor of a rate hike than there were in the June meeting. Rates dropped on bonds and mortgages after the report was released. Friday Fed Chairperson, Janet Yellen in a speech in Cleveland said, ” it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy.” This statement caused bond and mortgage rates to rise. The Federal Funds Rate has been near zero for 7 years in an attempt to stimulate the economy. The last time the Fed rose rates was 2006.

June’s price and sales date will be released in the next couple of weeks. From what I am seeing I would not be surprised to see the unsold inventory rise from the 3.5 month supply last month. It seems that while the real estate market is still quite strong in the highest price ranges we are seeing some sluggishness in many areas. Even new homes, which we have seen selling at record prices, have begun to sit when priced too high. I’d expect to see the month over price gains begin to moderate. Year over year they will still show strong gains because of a nice run up the first half of 2015.