Economic update for the week ending January 17, 2015

Economic update for the week ending January 17, 2015

Stock markets down for third straight week – Stocks had another volatile week with large daily swings. Retail holiday sales were up, yet below expectations. The World Bank forecasted global economic weakness for 2015. The Producer Price Index showed a second monthly drop, and oil continued to slide. Fortunately, stocks closed up on Friday to make up some of the week's losses. The Dow Jones Industrial Average closed the week at 17,511.57 which was down from last Friday’s close of 17,737.36. The S&P 500 closed the week at 2,019.42 down from  2,044.81 last Friday. The NASDAQ closed at 4,634.38 also down from 4,704.07 last week.

Treasury Bond yields continue to drop  – The 10 year Treasury bond closed the week at 1.83% which was down from 1.98% last week. The 30 year treasury yield was 2.44% which was down from last week's close of 2.55%. Lower inflation news, and a flight to safety from stocks caused this drop. 

Mortgage Rates drop again - near historic lows – The Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average for the week was down to 3.66% from last week's 3.73%.  The 15 year fixed was 2.98%, which was down from 3.05% last week. The 5 year ARM was 2.9% The 1 year ARM was 2.37%.  Rates rose with stocks on Friday so today's rates are about 1/8% higher than  the survey rates. Jumbo rates are a little higher at just under 4% for a 30 year fixed, and about 3.25% for a 15 year fixed.

DataQuick shows prices and the number of sales up in California  - DataQuick reported that 36,468 new and resale houses and condos closed in California in December.This number was up 23.8%from the 29,459 recorded in November. It was also up from 34,949 last December. This reverses a trend of fewer sales which included November's shockingly low numbers. December's sales were still 15% below the average number of December sales recorded in California since DataQuick began recording this data in 1988.

Foreclosed property sales accounted for 4.7% of the sales. That was down from 6.9% one year ago. Foreclosed home sales peaked at 58% of the homes sold in February 2009.

Short sales accounted for 6.3% of the sales. They were down from 10.3% of all sales in December 2013.

Cash purchases accounted for 23.8% of all sales. The monthly average for cash purchases dating back to 1988 is 16.7%.

DataQuick reports that the median price rose in December for its 34th consecutive month over same month yearly increase! - The median price paid for a home in California in December was $383,000. This was up 1.8% from November's $381,000, and up 6.3% from last December's$365,000 median price. In Los Angeles County the median price was $460,000which was 7% higher than last December's median price of $430,000.  Our markets have prices well above the median price levels, but this data does show trends and comes from an official source who uses recorded sales. 

The Producer Price Index shows prices fall .3% in December. - Inflation continues to tame as The Producer Price Index shows a decline in prices of .3% in December  which was thelargest drop since October 2011. December's drop also followed a drop of .2%in November. For 2014 Producer Prices rose just 1.1%. The 12 month rise ending November 2014 was 1.4%. This shows that the inflation rate is continuing to drop. Much if this drop is due to falling gas prices. A broader measure of inflation which excludes food, energy, and trade services showed inflation up a very slight 0.1% in December after being flat in November. Experts expect that with retail sales prices and hourly earnings falling in December, both key inflationary measures, low inflation should keep the Federal Reserve from rising short term interest rates longer than previously expected. The Federal Funds Rate and Discount Rate set by the Fed have been near zero since December 2008. It was widely thought that short term interest rate increases would begin this summer.

Holiday sales post biggest increase since 2011, yet below expectations. - The National Association of Retailers reported that retail holiday sales for November and December rose 4.1% from last year. That makes 2014 holiday sales it's largest increase in 3 years. They were expecting an increase closer to 5%. In another more optimistic report by Shopper Trak holiday sales were up by 4.6%, which was the largest yearly increase since 2005.