Looking for information on all things markets related?  Syd Leibovitch, our fearless leader here at Rodeo Realty, has released his latest update to help you stay informed.
Interest rates were down sharply again this week marking a drop of almost 1/2% in the last two weeks! This drop is due to fear that the economy may suffer due to Congress’ inability to both pass a resolution to fund the government, and increase the debt limit. The two are different. We are just over a week away from expiration of the last resolution to fund the government. Failing to extend funding would result in a shutdown of the government. This happened twice during the Clinton administration. Both times funding was approved after social security, Medicare, and government employee paychecks were stalled. National parks and other non essential services were also closed. Raising the debt limit is something different. We will reach the debt limit around mid October. Not raising the debt limit could be far more serious. Basically we would be out of money with no ability to borrow more. This would cause a default on United States’ bond payments as new debt would not be available to pay off maturing debt. There also would not be enough funds to fund the government even if funding was approved.  It would be the first time in history that the U.S. defaulted on its debt. This would be far more disastrous for the economy. In 2011 the stock market dropped about 15% in a three day period and the U.S. credit rating was downgraded for the first time in history because we came so close. The economy did suffer when this happened.  This fear that one or both of these may not happen on time has everyone nervous about the economy, which has caused the Fed to continue its bond and mortgage buying program which has brought interest rates down.

Rates were down by a large margin this week according to the  Freddie Mac Weekly Primary Mortgage Market Survey. The 30-year fixed rate dropped down to 4.32% from last week’s 4.50%. The 15-year rate also fell to 3.37% from last weeks’ 3.54% .  A year ago this week according to the survey, the 30-year rate was at 3.4% while the 15-year rate was at 2.73%. We are seeing 30 year fixed conforming rates at about 4.25%. 4.5% for high balance conforming, and 4.75% for jumbo rates.


Other  economic news that has caused concern included that FHA was underfunded and may need public funds. The Federal Reserve chairman has resigned and we are unsure who will be appointed to replace him.
Stocks slumped a bit this week as talks of a potential government shutdown had investors worried. The Dow broke its three-week positive streak, closing at 15,258.24 down -1.25% from last week’s 15,451.09 close. The Nasdaq however was up slightly on the week, closing at 3,781.59 on the week up just .18% from last week’s 3,774.73 finish. The S&P 500 ended at 1,691.75 down -1.06% from last week’s 1,709.91 close. The yield rate for the 10-year Treasury note was at 2.64% this week down from last week’s 2.75% close.


The Case-Shiller report for July showed that prices increased at the smallest monthly pace since March. Home prices rose 1.8% in July as compared to 2.2% in June. After seasonal adjustments, prices were up .6% in July which was the lowest gain since September.  Year-over-year home prices rose 12.4% in July just above June’s 12.07% increase but still around 21% under peak home prices hit in 2006. For the 20 major cities tracked by the report, 15 saw slower monthly price growth in July. For the  Los Angeles area the index rose 2.1% in July as compared to 2.3% in July and up  20.8% year over year.


The FHA reported that home prices rose a seasonally adjusted 1% in July and up 8.8% from the year earlier. This was the 18th consecutive monthly price increase for this index. 


The Census Bureau reported that new home sales were up in August. Builders sold new houses and condos at an annual rate of 421,000, just below analyst predictions of around 425,000 in annualized sales. Sales were up 7.9% from the 390,000 annual rate recorded in July. The LA Times reported that sales of newly constructed homes rose in all regions expect the West, where sales were down  14.6% from July. The median sale price for a new home in August was $254,600 nationally and there is a five-month inventory of homes for sale at the current pace. 


The National Association of Realtors reported that its seasonally adjusted index for pending home sales dropped 1.6% in August to 107.7.This was the third straight monthly drop but signed contracts are still nearly 6% higher than a year earlier.  The pending home sales index from the California Association of Realtors also saw a drop, it fell 5% in August to 108.3, down from 114 in July, based on signed contracts.  Pending sales were down 8.9%  from the 118.9 index recorded in August 2012.  


Fewer and fewer sales in California are now distressed properties. The C.A.R. reports that the share of equity sales – or non-distressed property sales – has risen on a month-to- month basis for 18 of the last 19 months and now makes up more than four in five sales, the highest share since November 2007. The share of equity sales in August was  84.7%, compared to  82.9% in July.  In Los Angeles County the share of distressed sales for August was 15% down from 17% in July and far below the 36% it was in August 2012.


Have a great weekend!
Syd 

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