Economic Update

August 15, 2020

Economic update for the week ending August 15, 2020

Stock markets were up again this week - Stocks rallied again this week despite congress’ failure to pass another stimulus package. Fortunately, investors feel a package containing approximately $2 trillion in stimulus will pass. The main sticking point in the bill is the approximate $1 trillion of the Democrat’s $3 trillion bill that will be given to state and city governments to offset budget deficits caused by loss of tax revenue due to the pandemic. Republicans don’t want to use federal money to bail out state and local governments. It’s also widely felt that many state and local governments would return to more strict business closures and stay-at-home orders if not for financial concerns. Retail sales in July reached pre-pandemic levels, as did housing sales. The number of first time unemployment claims dropped below 1 million last week for the first time since March. The Dow Jones Industrial Average closed the week at 27,931.02, up 1.8% from 27,433.48 last week. It’s down 2.1% year-to-date. The S&P 500 closed the week at 3,372.85, up 0.6%  from 3,351.26 last week. It’s up 4.4% year-to-date. The NASDAQ closed the week at 11,017.12, up 0.1% from 11,010.94 last week. It’s up 22.8% year-to-date.

U.S. Treasury bond yields The 10-year treasury bond closed the week yielding 0.71, up from 0.57% last week. The 30-year treasury bond yield ended the week at 1.45%, up  from 1.28%  last week.

Mortgage rates – The August 13, 2020 Freddie Mac Primary Mortgage Survey reported mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate average was 2.96%, up from 2.88% last week. The 15-year fixed was 2.48%, up from 2.44% last week. The 5-year ARM was 2.90% unchanged  from 2.90% last week.

California homes were more affordable in the second quarter of 2020 - The California Association of Realtors announced that 33% of California households could afford to purchase a median priced single family home in the second quarter of 2020, up from 30% in the second quarter of 2019. The income needed to purchase a $610,850 median priced home was $115,200. That qualified for a payment of $2,880 which included principal, tax, and insurance on a 3.43%  30-year fixed loan with 20% down. 44% of California households were able to qualify for a median priced condominium or townhouse. The income needed to qualify for a payment of $2,280 was $90,000. That payment included principal, interest, taxes, insurance, and homeowner’s fees.
Official home sales numbers for July will be released next week, but preliminary numbers were quite strong. It appears that the number of sales will be about 6% higher this July than last July, and the median price will show a staggering increase of nearly 10% from one year ago. The official numbers will be included in next week’s report.
Rodeo Realty