Well, to help the pain go away, I thought I’d pass along a recent email from the owner of Rodeo Realty–a great, smart man by the name of Syd Leibovitch. Syd’s broken down the week’s markets down. Everything from stocks to interest rates. Enjoy!
Economic Update for the week ending July 19, 2013
This week Ben Bernanke spent two days testifying in front of Congress in an attempt to calm the markets. His moderate remarks on the future of the bond buying program included saying that the pace of asset purchases could be reduced “somewhat more quickly” if the economy recovered faster than predicted. He also indicated that the current pace “could be maintained for longer” if economic indicators including employment rates and inflation did not show major improvement. Fortunately, Bernanke was successful as interest rates declined and the stock market rallied during his testimony.
The Dow and S&P 500 hit closing and all-time highs this week before dropping back on Friday in part as a response to disappointing earnings reports from both Microsoft and Google. The Dow settled out the week at 15,543 up .39% from last week’s 15,464. The Nasdaq closed at 3588 down .33% from 3,600 last week. The S&P500 finished the week at 1692 up .66% over last week’s 1,680.
The 10-year Treasury note yield ended slightly lower for the week, 2.5% down from last week’s 2.59%. After recent upward climbs, interest rates settled down this week. The Freddie Mac Weekly Primary Mortgage Market Survey showed a 30-year fixed rate at 4.37% down from last week’s 4.51%, while the 15-year fixed is at 3.41% down from last week’s 3.53%.
Oil prices saw their fourth weekly gain this week, up over $108 a barrel. The Labor Department reported a drop in claims for unemployment benefits, falling 24,000 last week, a sign that job gains show continue. In other positive economic news, the Federal Reserve Bank of Philadelphia said manufacturing activity in the mid-Atlantic region grew in July at the fastest pace in more than two years.
The latest report from DataQuick showed that Southern California median home prices rose 28.3% in June compared to a year ago, a number larger than the year-over-year jump during the housing boom and in fact the biggest on record for DataQuick. The Southern California median sales price reached $385,000 last month, 4.6% more than May (also the biggest month over month increase on record). Overall sales were down a bit. A total of 21,608 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 6.2 % from 23,034 sales in May, and down 2.1 % from 22,075 sales in June 2012. Last month’s year-over-year sales decline was the first for any month since last September. I was asked by the Los Angeles Times this week to comment on these numbers and told their reporters that I expect prices to double from their bottom last year. In June, 33% of all Southland home sales were for $500,000 or more, up from 31.9% of sales in May and up from 23.1% a year earlier this demonstrates the strength in the housing market above the median price. Last month over-$500,000 sales were the highest since February 2008.
Turning to statewide numbers, data released by the California Association of Realtors found that California sales in June were down slightly, 3.8% from a revised 431,490 in May and down 3.7% from a revised 430,960 in June 2012. The statewide sales figure represents what would be the total number of homes sold during 2013 if sales maintained the June pace throughout the year. This is part of the effect of extreme low inventory with not enough homes for sale to meet buyer demand. No wonder prices are up so sharply!
The statewide median price of an existing, single-family detached home rose 2.7 % from May’s revised median price of $417,350 to $428,510 in June. June’s price was up 33.5 % from a revised $320,990 recorded in June 2012. Inventory remains well below normal, continuing to drive pricing. For the Los Angeles Metro area the median sold price went up 3.4% over May’s $379,640 median but up 31% from June’s $298,100.
Rising prices are leading to an increase in jumbo loans. DataQuick also showed that jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 28.5% of last month’s Southland purchase lending, the highest since August 2007, when jumbos made up 36.7% of the market. ARMs are also on the rise, 9.2% of Southland home purchase loans were adjustable-rate mortgages, up from 8.0% the prior month and 6.7% a year earlier. June’s figure was the highest since ARMs were 10.5% of the purchase loan market in August 2008.
Also this week, RealTrends released their July 2013 report showing that nationwide the rate of housing sales grew 10.2% from June 2012. The annual rate of new and existing home sales for June 2013 was 5.612 million up from the 5.091 million recorded in June 2012 but down from the 5.984 million annualized rate in May 2013. This demonstrates that the national market is similar to our local area in which prices are up sharply due to inventory levels not sufficient to meet buyer demand which is starting to negatively impact the number of sales.
There is also confidence in the new home market. The National Association of Home Builders, reported that its housing-market index went up six points to a reading of 57 in July. This is the third straight month with a rise and that index is now at its highest level since January 2006. However NAR reported that housing starts remain sluggish and fell 9.9% in June still up 10.4% from one year ago but losing ground as they had been up 30% to 40% year-over-year in earlier months this year. This is a result of homebuilders not being able to find property to develop and achieve the necessary approvals once again, causing a shortage of inventory.
In a surprising turnaround, rental prices were reported up as tenants are continuing to face an undersupply of available rentals which could lead to more rent increases.
So to recap, the week ended with rates lower than last week. Conforming rates up to $417,000 are 4.375%, high-balance conforming up to $625,500 in LA and Orange and $598,000 in Ventura County are about 4.625% and jumbo 30-year-fixed are in the 4.875% range.
I hope you 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.