ECONOMIC AND HOUSING MARKET UPDATE FOR THE WEEK ENDING November 14, 2014
Stock Market – Stocks again hit all-time highs this week rising on higher than expected retail sales data, lower gas prices, employment gains, higher consumer confidence readings, and better than expected third quarter numbers in Europe. The Dow Jones Industrial Average closed the week at 17634.74, up from last weeks close of 17,573.93. The S&P 500 closed at 2039.82 up from last Friday’s close of 2031.92. The Nasdaq closed at 4688.54, well above last weeks close of 4632.53. The Dow and S&P continued to hit all-time highs several times this week while the Nasdaq is at a 14 ½ year high!
Treasury Bond Rates – The 10 year treasury bond closed the week at 2.32% unchanged from last Friday’s close. The 10 year treasury was higher during the week, rising to as high as 2.4%, but dropped back on Thursday and Friday. Long term home mortgage rates follow bond rates, so this 10 year rate is considered a benchmark rate.
Mortgage Rates – The Freddy Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average for the week was 4.01% just about unchanged from last week which was 4.02%. The 15 year fixed was also level at 3.2% from 3.21% last week.
Home Sales – DataQuick reported that the number of statewide home sales were up 1.4% in October from September, and up 1% from October 2013. Although slight, it marked the second consequent month of year over year increases. The October number of sales were down 14.1% below the average October dating back to DataQuick’s figures beginning in 1988. Investors accounted for 23.6% of all sales, the lowest rate since 2010. Short Sales accounted for 6.1% of sales, just above the 6.0% last month and down from 10.3% last October. The Southern California region saw monthly home sales drop 0.4% from September and 4.4% from last October to a 3 year low. The Southern California region showed the number sales in October 17.7% below the average October dating back to 1988. Most of the reduction in sales was accounted for in areas at or below the median price level like Riverside and San Bernardino County not Los Angeles. Unlike The California Association Of Realtors figures which are based on Realtor member’s reported sales , DataQuick uses recorded sales from county recorders.
Prices – DataQuick reported that the California Median price paid for a home was $382,000, down 1.8% from $389,000 September, yet up 7% from October 2013 when the median price was $357,000. This was the 32nd consecutive month of year over year increases. The Southern California median price dropped 0.7% from September’s median price to $410,000. That was up 6.8% from October 2013. The median price is the point in which half the homes sell for more, half the homes sell for less. It is a good economic indicator, but does not represented of any particular home or area.
Retail Sales – The Commerce Department reported that US retail sales increased .3% in September beating analysts’ expectations of a .2% rise. The commerce Department added that “ falling gas prices, increased employment, consumer optimism caused sales to beat estimates”. Experts expect retail sales this holiday season to increase by 4.2% from last year. Retailers make as much as 40% of their revenue in the last few months of the year.
Consumer Confidence – The Thomas Reuters / University of Michigan final October reading on consumer sentiment was 86.9, up from 84.6 in September. It was the highest reading since July 2007. This is a good indicator on consumer spending in the near future. It is certainly a good sign for home sales.
Fannie Mae – reported that confidence in home selling environment hit a 7 year high. Doug Duncan, the Vice president and chief economist for Fannie Mae said “consumers are growing more optimistic about the housing market in the face of broader improvement in consumer sentiment”. He further stated that he expects more sales and an even healthier housing market in 2015.
While I agree the Real Estate market is very good, we are 14% below the average number of sales monthly from data collected over the past 26 years. If anything we should be over those numbers as there is so many more single family attached and detached homes and a growing population. At some point sales are going to increase significantly. Fannie Mae spoke about this briefly, as indicated above. They are expecting to see an increase in sales in 2105. Forecasts from other experts should be out soon. The bottom line is: if you think the market is moving now, just think how much better it could be if sales were at levels that are considered normal?