Economic update for the week ending July 14, 2018

Stocks up for a second straight week – Stocks rallied again this week as investors expect a robust second quarter profit reporting season. Fueled by tax cuts and a strong global economy, many companies are expected to report double-digit profit growth. Stock markets are now just 3% below their all-time highs reached in January. The only thing holding them back is fears of trade wars and tariffs, according to analysts. The Dow Jones Industrial Average closed the week at 25,019.41, up from 24,456.58 last week. It is up 1.2% year-to-date.  The S&P 500 closed the week at 2,801.31, up from 2,759.83.  It’s up 4.8% year-to-date. The NASDAQ closed the week at 7,825.98, up from 7,688.39 last week.  It’s up 13.8% year-to-date.

Treasury bond yields mixed this week  –  The 10-year and the 30-year treasury yield ended the week just 0.10% apart. It’s unusual for the 10-year and the 30-year yield to be so close. Usually an investor would want a higher rate when investing for a longer period of time. This tells us that investors may feel that rates will come down in the coming years. The 10-year Treasury bond closed the week yielding 2.83%, up  from 2.78% last week. The 30-year Treasury bond yield ended the week at 2.93%, almost unchanged from 2.94%  last week. We watch bond rates because mortgage rates follow bond rates.

30-year mortgage rates unchanged, while shorter term rates were slightly higher this week –  The July 12, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.53%, unchanged from 4.52% last week. The 15-year fixed was 4.02%, up slightly from 3.99% last week. The 5-year ARM was 3.86%, up from 3.74% last week.
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We will have June sales figures next week. The number of sales have been lower this year than in 2017–this is due to tighter inventory. The reduced number of homes for sale has also pushed price increases up at a faster pace than over the last few years. Year-over-year price increases have been almost 9% for a median priced home in California. In May, there was just a 3-month supply of homes for sale–a normal market would be six to seven months. We may be beginning to see some pressure in the higher price ranges in all of our areas. This may be because sellers have been too aggressive in pricing. Unfortunately, when one or two sellers push the price above what is realistic, others look at what’s listed instead of what is selling. We are seeing homes in many areas beginning to reduce.  Let’s see if this impacts the inventory levels when the reports come out.

Author,
Syd Leibovitch