Los Angeles County Economic update March 28, 2014

L.A. County's unemployment rate in February fell to 8.7% (from 8.9% in January) with employers adding 27,700 jobs to their payrolls (they lost 63,000 jobs in January). A year ago the rate was 10.2%. The statewide unemployment rate in February was 8%. Los Angeles and Long Beach both had 9.8% unemployment. Over the past 12 months, employers in L.A. County have added 86,000 jobs to their payrolls, for a growth rate of 2.1%. 

It was a mostly down week in the markets. Friday saw a boost from the news that consumer spending rose in February at the fastest rate in several months, up 0.3% last month on a seasonally adjusted basis. Americans spent more money on health care and utilities but purchases of durable goods fell for the third month in a row. Also personal income rose 0.3% in March and the U.S. savings rate hit a four-month high of 4.3% from 4.2% in January. Inflation-adjusted disposable income was up 0.3%, the biggest advance in five months. The Dow rose this week to 16,323.06 up 0.13% from last week’s close of 16,302.70. The Nasdaq however dropped to 4,155.76 down -2.83% from last week’s close of 4,276.79 led by a plunge in biotech stocks. This was the worst week for the Nasdaq since October 2012. The S&P 500 also fell, ending the week at 1,857.62, down -0.47% from last week’s 1,866.40 close. 

The ongoing effect of the Fed’s remarks last week continued to be felt on interest rates. The Freddie Mac Weekly Primary Mortgage Market Survey showed that the 30-year-fixed rate rose  to 4.40%, the rate was 4.32% last week. The 15-year-fixed rose to 3.42% from last week’s 3.32%.  A year ago the 30-year fixed was at 3.57% and the 15-year was at 2.76%. 

The 10 year treasury bond yield ended the week at 2.71%. It was 2.75% last Friday.

The Commerce Department reported that sales of new U.S. single-family homes fell -3.3% in February to a seasonally adjusted annual rate of 440,000 units which is the lowest level seen since last September. The rate was down -1.1% compared to February 2013. Sales fell -15.9% in the West. January’s sales were also revised downward to a 445,000-unit pace from a 468,000-unit pace. Some of the slowdown continues to be blamed on unusually cold weather but economists are predicting a rush on homes as household formation begins to accelerate again with the improving economy.  Inventory is at a 5.2 month supply, the highest level since December 2010. The median price of a new home was down -1.2% from February 2013.

Consumer confidence rose to its highest level in more than six years. The Conference Board indexrose to 82.3 in March compared to 78.3 the previous month. Consumers expect the economy to continue to strengthen and are showing optimism that both business conditions and the labor market will improve over the next six months.

The composite 20-city S&P/Case-Shiller home price index  was up 13.2% in January from a year earlier with all 20 cities showing year-over-year gains.  Prices in the 20-city index were 0.1% lower than the prior month, but that is mostly due to the cold winter throughout much of the country,  adjusted for seasonal variations, prices were 0.8% higher month-over-month.  For the Los Angeles metro area, prices were up 18.5% year over year and down -0.3% month over month (but up 0.4% once seasonally adjusted).

The National Association of Realtors® reported that its seasonally adjusted pending home sales index was down -0.8% to 93.9., it was down -10.5% from February 2013. A combination of cold weather, higher mortgage rates, and limited inventory have cramped the market but most economists are expecting a spring rebound.

The California Association of  Realtors®  however saw that pending sales were up in February, jumping 14.2% from January but down -12% from last February. The index rose from 84.8 in January to 96.8 in February and was 110.1 in February 2013. Distressed sales continue to be a smaller part of the market. Equity sales were up statewide, increasing to 85% from January’s 84.4%. In Los Angeles, single-family distressed sales were 14% of the market compared to 16% in January and 32% one year ago.

Next week will be a big week for economic news. Perhaps the most telling report that could impact interest rates is the jobs report which will come out at the end of next week. Expect rates to rise on a good report, 180,000 new jobs or more. Expect rates to remain stable at 160,000 or so, and if the report comes in much lower rates could drop! Good news for the economy is bad news for interest rates ( they rise), and bad economic news is good news for rates ( they fall).

Locally we are seeing a spring surge in prices. we are not seeing as many new listings as we would usually see in March, but I would expect many more in the next few months! 

Economic Update 3/23/14

 This week marked the first meeting of the Fed under new Chair Janet Yellen. The Federal Reserve opted to continue the taper of the mortgage and bond-buying program, dropping participation by another $10 billion per month to a rate of $55 billion per month. The Fed Open Market Committee also changed language that stated the U.S. central bank's key policymaking body would begin to consider raising interest rates once the national unemployment rate hit 6.5%. The new change gives the Fed more room in deciding when to raise rates regardless of the unemployment rate. Rate increases are still off in the future but some economists feel that they could move more quickly once they begin. Yellen indicated that the bond-buying program could end this fall with short term interest rates probably being raised about six months later. It would be the first hike since 2006. Yellen’s frank talk was dubbed a mistake by many in the media.

Yellen’s remarks caused ripples in the market early in the week but stocks rose Friday on positive economic data. The Philadelphia Federal Reserve's manufacturing-activity index for March came in higher than expected showing an increase in regional manufacturing. The Dow rose this week to 16,302.70 up 1.48% from last week’s close of 16,065.67. The Nasdaq saw a more modest increase to 4,276.79 up 0.74% from last week’s close of 4,245.40. The S&P 500 ended the week at 1,866.40, up 1.37% from last week’s 1,841.13 close. 

The Freddie Mac Weekly Primary Mortgage Market Survey showed that the 30-year-fixed rate fell to 4.32%, the rate was 4.37% last week. The 15-year-fixed fell to 3.32% from last week’s 3.38%.  A year ago the 30-year fixed was at 3.54% and the 15-year was at 2.72%. Unfortunately,  rates rose later in the week after the Fed's announcement.  The 30 year rate is closer to 4.5% for loans under $417, 000 and about 4.75% for higher loan amounts. The 15 year is about 3.5% for loans up to $417, 000 and 3.75% for higher balance loans. 

The 10 year treasury note yield rate rose to 2.75% after closing at 2.65% last week. It was at 1.95% one year ago.

The National Association of Realtors® reported that February home sales dropped -0.4% to an annual pace of 4.60 million units, the lowest level since July 2012. Sales have declined in six out of the seven last months.  The median existing home price is at $189,000, up 9.1% from February 2013. In the West alone, existing home sales rose 5.9% to a pace of 1.07 million from January but were down -10.1% from a year ago. The median price in the West was $279,400, up from 18% from last year. Total housing inventory was up 6.4% in February to 2.00 million existing homes for sale. This represents a 5.2 month supply and is up from the 4.6 month supply a year ago. Distressed homes were 16% of sales nationwide compared with 25% a year ago. The median time on market for February was 62 days, down from 67 days in January, and 74 days a year ago. A total of 34% of homes sold in February were on the market for less than one month. First-time buyers accounted for 28% of all sales compared to 26% in January and 30% one year ago. All-cash sales were 35% of transactions compared to 33% in January and 32% one year ago.

Data from the California Association of  Realtors®  shows California home sales fell in February, but housing inventory increased as sellers gear up for the spring home-buying season. Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 361,210units in February, which was down-0.7% from revised 363,930 in January and down -13.7% from a revised 418,520 in February 2013.  The statewide median price of an existing, single-family detached home declined -1.6% from January’s median price of $410,990 to $404,250 in February.  February’s price was 21.3% higher than the revised $333,180 recorded in February 2013, marking two full years of consecutive year-over-year price increases and the 20th straight month of double-digit annual increases. Inventory improved with the available supply of single-family homes for sale now up to 4.7 months from January’s 4.3 months. The index was at 3.6 months in February 2013. A normal supply is generally six or seven months. In Los Angeles County, the median sold price was $389,080 in February 2014, down -8.1% from January’s $423,570 but up 15.2%from February’s $337,630. Sales in Los Angeles were down -8.9% on a month-to-month basis, and down -14.4% year over year. The housing inventory in Los Angeles is currently 4.6 months, up from 4.0 in January 2014, and also up from 3.3 months a year ago.  Median time on market in Los Angeles is currently 43.6 days down from 46.6 days in January and up from 36.5 days in February 2013.

The National Association of Home Builders/Well Fargo builder sentiment index rose to 47 in March, up from February’s reading of 46. Readings below 50 indicate more builders view sales conditions as poor rather than good. The overall index had been over 50 from June through January. The measure of builders' expectations for sales over the next six months fell one point to 53, the lowest level since May, however builders' view of current sales conditions for single-family homes rose one point this month to 52.

The Commerce Department reported that housing starts were down -0.2%to a seasonally adjusted annual rate of 907,000 units, following January’s revised -11.2% drop (it was originally reported at -16%). Groundbreaking was down -5.5% in West and also down in the Northeast but up in the South and Midwest. Permits to build homes were up 7.7% in February to a 1.02 million-unit pace. Permits for single-family homes were down -1.8% but multifamily permits were up 24.5%.

The February numbers from the Southland Regional Association of Realtors® show that inventory is on the rise. Inventory increased 37% from a year ago. At the end of February there were 1,419 homes on the market in the San Fernando Valley as compared with 1,033 a year earlier. The inventory rate is currently 3.2 months versus a 1.9 month supply a year ago.  The median home price was $475,000, up 13% from $422,000 a year earlier but down $10,000 from January’s median. Sales in February dropped -16% from a year ago and -8% from January.

The National Housing Trend Report from realtor.com® showed that the nationwide median list price increased 7.6% year over year to$199,000. The media age of inventory also rose 6.5% to 114 days. The Los Angeles-Long Beach MSA was one of the ten markets nationwide with the biggest year-over-year increase in median price. Prices rose 20% to $449,999.

It was a week full of data! Activity is great and its gearing up to be a very active spring!

Have a great week!

Shohreh Kiaei

Rodeo Realty

818 943 8304

email@shohrehkiaei.com

Home Selling in LA 101

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