Economic update for the month ending July 31, 2015
Economic update for the month ending July 31, 2015
Stocks up slightly for the month, even after dropping in almost every session over the last two weeks – Stocks rose early in the month following a third Greek bailout, which kept Greece from leaving the Euro. First quarter U.S. corporate profits were strong in just about all sectors, except energy companies due to a drop in oil prices, and companies with a lot of exposure to China. The Chinese stock markets dropped aver 30% before stabilizing, averting a near collapse. On the last week of the month The Labor Department reported that wage growth had stalled to the lowest growth level in 33 years. Stocks were quite volatile this month.
The Dow Jones Industrial Average closed the month at 17,689.96, up slightly from 17,596.35 on June 30. The S&P 500 closed the month at 2,103.84, up from 2057.64 at the end of June. The NASDAQ closed the month of July at 5,128.28, up from 4,958.57on June 30.
Treasury Bond yields lower in July – The 10 year Treasury bond yield closed the month at 2.18%, down from June’s close of 2.35%, The 30 year treasury bondyield closed July 31 at 2.91% , down from June’s close of 3.11%. Weak wage growth, tame inflation, fears of a strong dollar, dropping oil prices, mixed profit reports, and trouble in the Chinese economy, caused investors to buy bonds in a flight for safety. This lowered rates on mortgages as well as home mortgage rates follow the treasury bond rates.
Mortgage Rates drop in July – The 30 year fixed rates ended the month around 3.875% for loans up to $417,000, and around 4.00% for loans over $417,000. The 15 year fixed rate loans are about 3.125% for loans up to $417,000, higher loan amounts have rates that are around 3.375%. 5 Year-ARM rate is around3.00% and 1 Year-ARM mortgages are around 2.50%.
U.S. Employers add 223,000 jobs in June – unemployment rate drops to 5.3% - The Labor Department reported that US employers added 223,000 non-farm new jobs in June. The unemployment rate fell to 5.3%, its lowest level since April 2008. This was good news which showed that the economy is continuing to gain strength. The negative part of the report was that wage gains, which seemed to be picking up in April and May, were disappointing in June. Wages were up just 2% for the year which is well below the Federal Reserve’s target of 3.5%.
Wage and benefit growth at lowest level in 33 years – The Labor Department reported that the employment cost index increased only 0.2% in the second quarter of 2015. This was the slowest pace of wage growthsince 1982. This was a disappointment to experts considering that around 3 million jobs have been added in the last 12 months, a near record level of job growth. Unfortunately wages have remained stagnant.
California adds 22,900 jobs in June – TheEmployment Development Department reported that employers added 22,900 non-farm jobs in June. California’s unemployment rate dropped to 6.3% in June from 6.4% in May. The unemployment rate was 7.5% last June. Although the state’s unemployment rate was 4.8% before the recession in 2006, California, the world’s eighth largest economy’s job growth has expanded 13.5% since the recession ended. U.S. job growth rose 9.4% since the end of the recession. The national unemployment rate is currently 5.3%. Unfortunately, California lost a higher percentage of jobs than the nation during the recession, but the state is on the right track adding jobs at a higher rate than the nation as a whole.
Home prices continue to rise – Core Logic reported that the median price of a single family home in California rose 3% in June to $417,000. This represents a 7% rise in the median price from last June. The median price is the point at which ½ the homes sell for more and ½ the homes sell for less. It’s really not an indication of any particular home or neighborhood, but it is the only official measure of home price comparisons. It is a good indication of trends. We have seen the higher priced markets have stronger price gains, so our markets have prices rising at a greater rate than markets at the price level of the median price. The California Association of Realtors reported that ( average price, a measurement that is not commonly used) home values were up 2.2% in June from May and 10.1% from June 2014. The average price in California was $634,190, according to the CAR.
California pending existing home sales continue to increase - The California Association of Realtors reported that June pending home sales were up 12.5% on an annual basis from June 2014. This marked the 7th straight month of increased sales numbers and the 5th straight month of double-digit gains. Month over month California as a whole saw fewer sales in June than in May, but Southern California pending home sales were up 4% in June from May.
U.S. Resale home sales jump - The National Association of Realtors reported that the number home sales of existing homes jumped in June to an 8 year high.
U.S. New home sales surprising disappointing - The Commerce Department reported that new home sales unexpectedly fell in June. New U.S. Single family home sales fell in June to a 7 month low. New home sales account for just 8% of housing sales and tend to be volatile on a month to month basis. Nevertheless, June single family new home sales dropped 6.8% in June on a seasonally adjusted basis. This was disappointing, as single family new homes had been trending up sharply, but single family new home sales are still up 18.1% from June of 2014. Data showed that new building permits jumped in June to an eight year peak. This is sign that new home sales will continue to increase as limited supply was factor in inhibiting sales in June.
The number of existing home sales continue to gain strength – Core Logicreported that same month, year over year home sales rose in June for the 4th straight month. Statewide an estimated 46,095 resale homes changed hands which represents anincrease of 10.8% from the number of homes sold in May and a 16.8% increase from June 2014. This rise in sales was despite a tight supply of inventory. TheCalifornia Association of Realtors reported that home inventory levels had dropped to a 3.7 month supply in June from a 4 month supply in May. A 7 month supply is considered a normal market. Homes are hitting the market in higher numbers than a year ago, but many are selling quickly, which has not allowed the unsold numbers to increasee state is on the right track adding jobs at a higher rate than the nation as a whole.
Housing starts continue to rise – TheCommerce Department reported that housing starts in June rose 9.8%. they also reported a surge in multifamily construction which was up 28.6 %. This accounted for the majority of the 9.8% overall rise in housing starts