Economic update for the week ending September 17, 2016
Stocks up for the week despite volatile daily swings – Stocks had a volatile week. There were large daily losses and gains as Fed members, and other analysts spoke about the possibility of a rate hike by the Federal Reserve at its policy meeting coming up this Wednesday and Thursday. As data rolled in, speculation of what the fed would do varied depending if the data was positive or negative. News that median family income rose last year at its fastest pace than any year in the last 30 years, last months inflation spike, and the low unemployment rate raised speculation that a hike was coming. Falling oil prices and lower import costs fueled speculation that the fed could hold off. Nobody knows for sure, until Thursday! The Dow Jones Industrial Average closed the week at 18,123.80, up from 18,085.46 last Friday. The S&P 500 closed the week at 2,139.16, up from 2,127.81 last week. The NASDAQ closed the week at 5,244.57, up from last week’s close of 5,121.91.
Bond yields inch up again this week on Fed rate hike speculation – The 10 year U.S. Treasury Bond yield closed the week at 1.70%, up from 1.67% last Friday. The 30-year U.S. Treasury Bond closed at 2.44%, up from 2.39% last week. Mortgage rates follow bond yields so we watch bond yields closely.
Mortgage rates slightly higher this week – The Freddie Mac Primary Mortgage Survey released on September 15, 2016 showed that average mortgage rates from lenders surveyed for the most popular mortgage products were as follows: The 30-year fixed rate average was 3.50%. The 15-year fixed average rate was 2.77%. The 5/1 ARM average rate was 2.82%.
California employers add 63,100 new jobs in August – The Employment Development Department reported Friday that the state added 63,100 net new jobs. This was much higher than experts had forecasted. Considering that the nation added 151,000 new jobs in August this number would suggest that California accounted for 42% of all jobs added nationwide last month. The state’s unemployment rate held steady at 5.2%, as more workers entered the workforce.
Consumer prices show signs of inflation as health care and housing prices spike in August – The Labor Department reported that consumer prices rose 0.2% in August after being unchanged in July. The 12 month increase in The Consumer Price Index (CPI) in August was 1.1%. That was well above July’s last 12 month increase of 0.8%. Experts had expected a 0.1% increase for the month. The Core CPI which does not include food or energy was up 0.3% in August. It’s up 2.3% for the 12 months ending August. It’s much higher than the CPI because of lower energy costs which are stripped out of the Core number. Healthcare costs, which are included in the Core number had the biggest monthly increase in 32 years. That’s something I’m sure we will hear a lot of talk about! Rents also pushed up housing costs as they maintained their steady increase.
Median family income shows biggest one year gain in over 30 years – The Census Bureau issued its annual report on incomes and poverty in America. Analysts were shocked by the 5.2% gain in median household income after inflation. It was the largest one year gain in over 30 years. Incomes were up in every category measured. It also showed that more workers had been able to move from part time to full time as more jobs were available. It was not pointed out in the reporting, but income growth has been very stagnant since the recession, so averaged since 2007 it’s not as stellar as it looks.
California’s number of existing homes sold up in August, but lower that last August – The California Association of Realtors reported that the number of existing homes sold totaled 420,360 on an annualized seasonally adjusted basis. That was up 1.1% from the number of homes sold in July, but down 2.2% from the number of homes sold last August on an adjusted basis. Existing single family homes include homes, condos, town-homes, and co-ops.
Existing home prices continue to increase – The California Association of Realtors also reported that the median price of an existing detached home in California increased 1.7% to $526,580 in August from July’s $517,650. Year over year the median price was up 5.8% from $497,520 last August.
Home inventory levels still near record lows – The California Association of Realtors also reported that their unsold inventory index dropped to a 3.4 month supply in August. It was at 3.6 months in July. A normal market would have a 6 to 7 month supply. Low inventory pushes prices higher.