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Trade war worries dragged down stocks this week

Stocks fell modestly while bond yields dropped to a three-year low as global markets reacted to an unexpected drop in China’s currency. As the trade war escalated, China retaliated by allowing its currency to drop to the lowest level in a decade. Cheaper currency makes Chinese goods less expensive for consumers in other countries, which basically offsets tariffs. Conversely, a weaker yen makes American and other imports more expensive to Chinese consumers. 

The Dow Jones Industrial Average closed the week at 26,287.44, down 0.7% from 26,485.01 last week. It’s up 12.7% year-to-date. 

The S&P 500 closed the week at 2,918.65, down 0.5% from 2,932.05 last week. It is up 17% year-to-date. 

The NASDAQ closed the week at 7,959.14, down 0.9% from 8,004.07 last week. The NASDAQ is up 20.0% year-to-date. 

Treasury Bond Yields at lowest level in 3 years

Bond yields dropped sharply this week. The 10-year treasury bond closed the week yielding 1.74%, down from 1.86% last week. The 30-year treasury bond yield ended the week at 2.26%, down from 2.39% last week. We watch treasury bond yields because mortgage rates often follow bond yields. 

Mortgage rates near record lows this week

The August 8, 2019, Freddie Mac Primary Mortgage Survey showed mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate average was 3.60%, down from 3.75% last week. The 15-year fixed was 3.05%, down  from 3.20% last week. The 5-year ARM was 3.36%, down from 3.46% last week. 

Home affordability drops in second quarter, but affordability is still higher than one year ago

The California Association of Realtors reported that 30% of California households could afford to purchase a $608,660 median-priced home in the second quarter of 2019. That was down from 32% in the first quarter, as the median price rose over 7% from the first to the second quarter, but homes are more affordable than one year ago when only 26% of households could afford the median-priced home in Q2 2018. The income needed to purchase a median-priced home was $122,96045% of households could afford to purchase a median-priced condominium or townhouse, which required an annual income of $95,960. 

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