Stock markets end week down sharply. – The Federal Reserve Open Market Committee statement was more cautious than expected Thursday. This caused investors to wonder if the Fed was worried that economic weakness abroad was beginning to weaken our economy at home. It was widely felt that the Fed would begin soon to raise short term interest rates which have been near 0% since 2008. They had already ended a stimulus program of purchasing mortgage securities and treasury bonds which was designed to bring down long term rates. In Thursday’s statement they not only hinted that they would not be raising short term rates so quickly, they stated that they would continue to reinvest their bond and mortgage holdings as they matured. This caused investors to wonder about the strength of the economic expansion which drove stocks down and bond yields lower. The week also was mixed with many companies reporting profits above expectations and many below expectations. The Q4 GDP report released on Friday was also below expectations which contributed to a 251 point drop in the Dow on Friday. The Dow Jones Industrial Average closed the week at 17,164.95 which was down from last Friday’s close of 17,672.60. The S&P 500 closed the week at 1,994.99 down from 2,051.82 last Friday. The NASDAQ closed at 4,635.24 also down from 4,757.88 last week.Treasury Bond yields remain at historic low levels – The 10 year Treasury bond closed the week at 1.68% which was down very slightly from 1.81% last week. The 30 year treasury yield was 2.25% which was down from last week’s close of 2.38%. The cautious Fed statement, and the lower than expected GDP report caused investors to leave sell stocks and purchase bonds which drove rates down.
Mortgage Rates remain near historic lows – The Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average for the week was 3.66% about the same as last week’s 3.63%. The 15 year fixed was 2.98%, which was down from 2.93% last week. The 5 year ARM was 2.86% The 1 year ARM was 2.38%. Rates dropped with stocks on Friday. Jumbo size loans have rates slightly higher yet still under 4% for a 30 year fixed, and about 3.25% on a 15 year fixed.
Consumer confidence reaches highest level in the past decade. The Thomson Reuters/ University of MichiganSurvey reported that consumer optimism reached the highest level in the past decade in the January 2015 survey. Consumer sentiment measured 98.1, up from 93.6 in December. It was up 20.8% from the 81.1 measured last January 2014. January 2015 marked the highest consumer sentiment reading since it was 103.8 in January 2004. Consumers judged prospects for the national economy as the best in a decade, and half of all consumers expect that the economic expansion would continue for another 5 years, according to the survey. This report is an important gage because it is a way to forecast consumer spending, an important driver of the economy.
Fourth quarter GDP growth disappoints investors – Fourth quarter gross domestic product, the broadest measure of goods and services produced across the U.S., showed a growth rate of 2.6%. This was less than experts forecasted and roughly ½ of the third quarter’s robust pace of 5%. The total growth for the year in 2014 was 2.4%. Following a holiday season that saw the strongest consumer spending in years this figure pointed out the lack of strength in the current expansion after it looked as if the expansion was gaining serious momentum.
The California seasonally adjusted unemployment rate drops to 7% in December from 7.2% in November.- The state unemployment rate was 8.3% one year ago in December 2013. Although the California unemployment rate is well over the National rate, California was among the states with the fastest job growth in 2014.
This week did not yield the amount of new listings I would hope for at the end of January. Usually we see more listings as many people hold off moving during the holidays. The shockingly, historically low 3.3 month supply of homes on the market has created a situation where we are seeing a spike in prices. It’s unfortunate to not have enough homes on the market for buyers to buy. The amount of multiple offers have increased dramatically. Virtually every sale has multiple offers. Buyers don’t know how high to go and sellers don’t know whose offers to take. Make sure your buyers know that if they want to make sure a home will comp out they are not going to be able to buy. No home that sells in this market comps out! The sales that look too high now will look like good deals in 60 to 90 days, I would think. Hopefully we will see more sellers begin to put their homes on the market and prices won’t shoot up too quickly. It looked like this was happening last August, but that trend reversed in the third quarter. I wish I had better advice than if a buyer sees a home they like they need to jump on it and offer as high as they possibly can. Unfortunately, many buyers that don’t go high enough and lose homes would go higher for after it is too late. Sometimes there is just no way to know how high to go.
Have a great weekend!
If you’d like more information on the San Fernando Valley or Los Angeles, or to have help looking for your next home, please feel free to reach out! I’m happy to help, no obligation.