Economic update for the week ending August 20, 2021

by Marc Tahler

Stock markets ended the week slightly lower – Stocks dropped following the third straight month of retail sales declines and the lowest consumer sentiment reading in several years, leading investors to feel the economy was showing signs of slowing off its overheated pace. At the same time some signs of slowing would lower the risk of inflation, and keep low interest rates in check, so the report was met with mixed results. The Dow Jones Industrial Average closed the week at 35,120.08, down 1.1% from 35,515.38 last week. It is up 14.8% year-to-date. The S&P 500 closed the week at 4,441.67, down 0.6% from 4,468.00 last week. It is up 18.5% year-to-date. The NASDAQ closed the week at 14,714.66, down 0.8% from 14,822.90 last week. It is up 14.2% year-to-date.

U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 1.26%, down from 1.29% last week. The 30-year treasury bond yield ended the week at 1.87%, down from 1.94% last week. We watch bond yields because mortgage rates often follow treasury bond yields.

Mortgage rates – The August 19, 2021, Freddie Mac Primary Mortgage Survey reported mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate was 2.86%, unchanged from 2.87% last week. The 15-year fixed was 2.16%, unchanged from 2.15% last week. The 5-year ARM was 2.43%, unchanged from 2.44% last week.

California home prices and sales show signs of normalizing in July – The California Association of Realtors reported that existing home sales totaled 428,980 on a seasonally adjusted annualized rate in July, down 2% from the number of sales last July. The median price paid for an existing home in July was $811,170, up 21.7% from last July when the median price was $666,320. While a 21.7% year-over-year increase in the median price would normally be a historic rise, it followed three straight months of year-over-year increases of 30% or more. There had never been a 30% year-over-year increase in the median price prior to April. The California Association of Realtors tracks inventory levels based on how many months it would take to sell the active listings in all MLS systems at the current sales level. There was a 1.9 month supply of homes for sale in July, up from a 1.7 month supply in June and down from a 2.7 month supply of homes for sale last July. Active listings are beginning to climb as new listings are outpacing sales. The California Association of Realtors have predicted that price increases will moderate to more healthy single digit increases in 2022. The graph below shows activity by County for Southern California.

Published on 2021-08-21 09:17:47