Stock markets rebound and make up all loses for the year in the last two weeks and more! – The S&P closed at a record high. The DOW broke 18,000 for the first time since December and is approaching all time highs. The Nasdaq closed at a 15 year high. News this week focused on improving conditions in Europe, and rebounding oil prices. The week began with markets rising on a Greek debt deal. A cease fire in Ukraine which should help the Russian and European economies caused markets to rise sharply when announced. A better than expected German economic growth report caped the week. Rising oil prices also led oil stocks to rise, and was welcome relief to oil producing states here at home. The Dow Jones Industrial Average closed the week at 18,018.35, higher than last Friday’s close of 17,824.29, and significantly up from 17,164.95 two weeks ago. The S&P 500 closed the week at 2,069.99, a record high, which was up from 2,055.47 last week and up from 1,994.99 two weeks ago. The NASDAQ closed at 4,893.84, a 15 year high, and up from 4,744.40 last week and up from 4,635.24 two weeks ago. These are significant increases in just a two week period.
Treasury Bond yields continue to rise – The 10 year Treasury bond closed the week at 2.05%, up from last week’s close of 1.95%, and up from 1.68% two weeks ago. The 30 year treasury yield was 2.63% which was up from last week’s close of 2.51% and 2.25% two weeks ago. A .38% increase in two weeks is a significant rise. It seems that the drop in stocks and interest rates in January was an overreaction to a couple of financial data reports that were below expectations. One specifically was a poor fourth quarter GDP report, that shocked the markets. New positive data has now caused the markets to correct. Rates and stocks are back to December levels.
Mortgage Rates continue to rise- The Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average for the week was 3.69%, up from last week’s 3.59%. The 15 year fixed was 2.99%, up from 2.92% last week. The 5 year ARM was 2.97%, up from last week’s 2.82%. The 1 year ARM was also up at 2.42% from 2.39% last week. The survey runs about a week behind. Rates rose as bond yields rose throughout the week. All rates rose this week. The survey will be closer to 3.8% next week for a 30 year fixed. While still under 4% conforming and just slightly over 4% for jumbo sized 30 year mortgages rates are still great, but about 0.375% higher than near all times lows couple of weeks ago.
California Association of Realtors’ report home affordability up slightly in fourth quarter – The California Association of Realtors released it’s housing affordability index on Thursday. It showed that affordability improved in the fourth quarter of 2014 over the third quarter,but declined from the 4th quarter of 2013. The percentage of buyer’s that could afford to purchase a median priced home edged up to 31% in the fourth quarter of 2014 from 30% in the third quarter. It was 32% in the fourth quarter of 2013. Home buyers needed an income of $91,550 to qualify for a purchase of a $452,140 state-wide median priced home. As rates and prices rise I’d expect to see a decline in the first quarter 2015 affordability which won’t be released until May.
The real estate market has entered a very heated pace. Many homes that had been sitting at the end of last year and at the very beginning of this year have sold. Some listings have had an increased amount of multiple offers. We are seeing a period of dramatic price increases over sales prices late last year in all markets. The San Fernando and Canejo Valley’s have not seen the price increases that the Westside and City have seen. While up sharply, the Valley areas are just approaching the 2007 highs, while much of the Westside and City have neighborhoods that are 30% above the highs of 2007. I’d expect the valley areas to continue to catch up. For many reasons those areas, closer to the median price, dropped more and began to rise later than the higher priced areas. I hope we will see more homes listed as sellers begin to feel enticed by what homes are selling for. The only way to slow price increases is to have more homes on the market. In December there was only a 3.3 month supply of homes on the market. That’s near a record low. A 6 to 7 month supply is considered normal. We won’t see the market normalize until we see more inventory.
Have a great weekend and happy Valentines Day!
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.