Curious how the markets rounded out February?  Here’s Rodeo Realty’s President Syd Leibovitch’s take on how the world’s economy is doing.

Stocks were up overall for the month but the cold and snow blanketing much of the country may be part of what is keeping a lid on a stronger economic recovery. Stocks were strongly up over last month. The Dow closed out the month at 16,321.90 up 3.97% from last month’s close of 15,698.85 and up 1.36% from last week’s close of 16,103.30. The Nasdaq ended the month at 4,308.12 up4.98% from last month’s close of 4,103.88 and up 1.05% from last week’s 4,263.41 close. The S&P 500 ended the month at 1,859.45, up 4.31% from last month’s 1,782.59 close and up 1.13% from last week’s 1,838.63 close.

Federal Reserve Board Chairman Janet Yellen said this week that some of the recent soft economic data may have been due to the unusually harsh weather in recent months and that the Fed plans to continue the taper of QE3 with a plan to stop bond-buying purchases through the program sometime in the fall. In the past, the Fed has said it wouldn’t consider raising rates until the unemployment rate hit 6.5% and inflation remained below 2.5% but Yellen amended that stating that a  6.5% unemployment rate is not the definition of full employment and there needs to be a greater consideration of how the labor market is performing. This was good news for the markets, as the February unemployment rate was 6.7% and 6.5% could be sooner rather than later. The prospects of keeping short term rates at or near zero after the unemployment rate hits 6.5% was welcome news for the markets after thinking short term rates could be rising soon.

Interest rates were pretty steady this week and were up slightly for the month. The Freddie Mac Weekly Primary Mortgage Market Survey showed that the 30-year-fixed rate was up to 4.37% from 4.33% last week.  The 15-year-fixed was up to 3.39% from last week’s 3.35%. At the end of last month the 30-year fixed was 4.32% and the 15-year fixed was 3.40%. A year ago the 30-year fixed was at 3.51% and the 15-year was at 2.76%. Jumbo rates are only about 1/4%. It’s a very small spread between the conforming mad jumbo rates right now.

The 10 year treasury note yield rate closed the month at 2.66%, it started the month at 2.61% and was at 2.73% last week.

The Conference Board’s index showed that consumer confidence fell more than forecast in February. It decreased to 78.1 from a revised 79.4 in January. Economists had predicted the reading to be around 80 (the index was in the mid-50s during the recession). Fewer American believe business conditions will improve over the next six months with the measure of consumer expectations falling to 75.7 from 80.8 in the previous month. Also the amount of consumers who said they believed that jobs would become more plentiful fell to 13.3% from 15.1% last month.

According to the Standard & Poor’s/Case-Shiller 20-city home price index, prices fell -0.1% from December, partly due to the cold weather across the country. It was the second straight monthly drop. The number matched the previous month’s decline. For all of 2013 prices rose 13.4%, the largest gain in eight years.  Los Angeles prices rose 20.3% from December 2012 to December 2013.

The Commerce Department reported that sales of new U.S. single family homes rose 9.6% in January to a seasonally-adjusted annual rate of 468,000 the highest level seen since July 2008. The number was far above the predicted 400,000 pace predicted by economists. Sales in the West along were up 11%. The overall rate was up 2.2% compared with January 2013. The median price of a new home rose 3.4% from January 2013. The amount of inventory of new homes is currently at 4.7 months, down from 5.2 months in December.

The Southland Regional Association of REALTORS® reported that San Fernando Valley home prices continued to rise in January. The median price gained more than 15% year over year and is now $485,000. The amount of properties on the market rose year over year by nearly 18% up to 1,297. Traditional buyers are now 84% of sales in the area compared to 65% a year ago. The inventory level is still very low representing only a 2.5 month supply. For the Santa Clarita Valley median home prices rose over 20% from last year to $432,900.
The California Association of REALTORS® reported that California pending home sales picked up steam in January and reversed a two-month decline. The Pending Home Sales Index rose 22.9% in January to reach 84.8, up from a revised index of 68.9 in December, based on signed contracts.  Pending sales were down -17.5%  from the revised 102.8 index recorded in January 2013.  It was the seventh straight month that equity sales have been more than 80% of total sales. The share of equity sales in January dipped to 84.4%, down from 84.5%  in December. Equity sales made up 64.2% of sales in January 2013. In Los Angeles County alone distressed home sales were at 16% in January, down from 17% in December 2013 and 35% one year ago.
The National Association of REALTORS® pending home sales index was up 0.1 last month to 95. The index has fallen -9% over the past year due to changes in mortgage rates, rising prices, and reduced inventory. The association projects that sales will total 5 million in 2014, down from 5.1 million in 2013.
We are finally coming to the most active time of the year. We are seeing an uptick in listings after several months with very few new listings. These listings, if priced right should sell quickly. Expect to see the number of sales increase significantly.

Have a great weekend and keep dry!

Syd


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