Economic update for the week ending June 26, 2021
Stock markets surged – S&P closed at record highs – Stock markets rallied and recovered from last week’s loses. Early in the week stocks rallied after Fed Chairman Jerome Powell stated that the Fed considered the current inflationary period transitory. He explained that comparing current prices to prices from one year ago when we were experiencing deflationary conditions at the worst part of the pandemic exaggerates inflation numbers. He also stated that prices are temporarily higher for goods and services due to pandemic related shut downs in manufacturing, and difficulties in hiring workers at a pace necessary to return to pre-pandemic levels. He stated that the Fed fully expects inflation to moderate as we move toward normalcy. On Thursday, President Biden announced that a bipartisan deal had been made on a $1.2 trillion infrastructure plan. Stocks rallied again as this spending will further stimulate the economy. The Dow Jones Industrial Average closed the week at 34,433.84, up 3.4% from 33,280.08 last week. It is up 12.4% year-to-date. The S&P 500 closed the week at 4,280.70, up 2.7% from 4,166.45 last week. It is up 13.9% year-to-date. The NASDAQ closed the week at 14,360.49, up 2.4%, from 14,030.38 last week. It is up 11.3% year-to-date.
U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 1.54%, up from 1.45% last week. The 30-year treasury bond yield ended the week at 2.16%, up from 2.01% last week. We watch bond yields because mortgage rates often follow treasury bond yields.
Mortgage rates – The June 24, 2021, Freddie Mac Primary Mortgage Survey reported mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate was 3.02%, up from 2.93% last week. The 15-year fixed was 2.34%, up from 2.24% last week. The 5-year ARM was 2.53%, unchanged from 2.52% last week.
Southern California home prices increased 24.7% year-over -year in May – Real estate data company DQNews (formerly CoreLogic/DataQuick) reported that May existing home sales in their six county Southern California region Jumped over 100% from the number of sales last May. That surge is mostly related to a near stoppage in sales last May at the start of the pandemic. Themedian price jumped 24.7% in the six county region. That marked the highest year-over-year increase in the median price ever. The county by county numbers were as follows: Los Angeles County recorded a 25% increase in the median price. Orange County recorded a 19.3% increase in the median price. San Bernardino County recorded a 16.8% increase in the median price. Riverside County recorded a 22.5% increase in the median price. Ventura County recorded a 20.9% increase in the median price. San Diego County recorded a 22.9%increase in the median price.
May U.S. home sales – The National Association of Realtors reported thatexisting-home sales jumped 44.6% from the number of homes sold last May.The median price paid for a home in May was $350,300, up 23.6% from last May’s median price of $283,500. May marked the 111th straight months of year-over-year increases in the median price. The unsold inventory level is at a 2.5-month supply, down from a 4.6-month supply one year ago. First time buyersaccounted for 31% of all purchases. Second-home and investor purchasesaccounted for 17% of all homes sold. Foreclosures and short sales accounted for less than 1% of all homes sold. All cash purchases accounted for 23% of all transactions.