Stocks were fairly stable this week- Stocks had an up and down week mostly tied to talks to extend Greece’s debt crises. On days where progress was made on a bailout deal stocks rose. On days were talks ended with no success, stocks dropped. Greece is on the verge of bankruptcy and leaving the Euro. They owe a debt payment of $1.8 billion on Tuesday to the International Monetary Fund. They cannot make the payment, so no deal puts them into default and on a path of leaving the Euro. China’s stocks dropped 7% on fears that their markets are overvalued. U.S. investors were again fearing higher interest rates as bond rates rose. The Dow Jones Industrial Average closed the week at 17,890.36, down from 18,015.95 last week. The Nasdaq closed at 5,112.19, almost unchanged from 5,117.00 last Friday. The S&P 500 closed at 2,102.31, also pretty much unchanged from 2,109.99 last Friday.
Bond yields rise sharply – More solid economic news at home caused investors to sell U.S. Treasury Bonds on fears of higher interest rates. It is widely felt that the Federal Reserve will begin raising its key interest rates at their September meeting. This will be the first interest rate hike from the Fed since 2006. Interest rates paid on U.S. Treasury Bonds increased sharply this week to the highest rates in over a year. The 10 year U.S. Treasury Bond closed the week at a2.49% yield, up from 2.26% last week. The 30 year U.S. Treasury Bond closed Friday yielding 3.25% , up sharply from 3.05% last Friday. Mortgage rates follow treasury rates, so this was not a good week for borrowers.
Mortgage Rates higher than last week– The 30 year fixed rate ended the week around 4.30% for loans up to $417,000, around 4.50% for loans between $417,000 and $625,500. The 30 year fixed rates on jumbo loans, loans over $625,500, are about 4.625%. The 15 year fixed rate loans are about 3.375% for loans up to $417,000, around 3.50% for loans between $417,000 and $625,500, and around 3.675% for loans over $625,500. The 5 Year-ARM rates are around 3.25% 1 Year-ARM mortgages are around 2.75%.
U.S. Consumer Confidence Rises – The University of Michigan reported that their consumer sentiment index rosefrom 90.7 in May to 96.1 in June. This was the highest level since January when the rating of 98.1 shocked experts. That was the highest rating in more than a decade. Last June the index was 82.5. For the first 6 months of 2015 consumer sentiment has improved at the highest pace since 2004. This increase is important because it suggest that consumer spending, which accounts for a majority of the economy, will continue to increase.
New home sales hit 7 year high – The Commerce Department reported that new home sales in May jumped 2.2%from April to a seasonally adjusted annual rate of 546,000 units. This marked the highest level of new home sales in 7 years. New home builders said that fears of higher interest rates contributed to buyer demand, as buyers rushed to lock in rates before they increase further later in the year.
U.S. home resales jump 5.1% – Prices continue to rise – The National Association of Realtors reported that sales of previously owned homes jumped 5.1% in May from April figures. This was a strong number which beat analysts’ expectations. One comment that was made by Lawrence Yun, the chief economist at NAR, was, “ Strong job growth for young adults and low down-payment programs are helping more young buyers enter the marketplace. The return of first time buyers in May is an encouraging sign.” The median price also showed strength rising 7.9% from one year ago for the nation as a whole. The median price in the west grew 10.2% from a year earlier and 4.3% from April.
Next Friday the Labor Department will release the June employment report. A high number will show that the economy is continuing to improve. An improving economy puts pressure on the Federal Reserve to raise its benchmark rate which has been near zero since 2008 in an effort to lift the nation out of recession. There has not been an interest rate hike since 2006. Expect mortgage rates to rise with a high number and to fall with a low number of jobs created.
I hope you are having a good weekend!
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