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Economic Update for the Week Ending May 22nd, 2021

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Stocks markets closed slightly lower this week – The economy is picking up steam and the recovery from the pandemic appears to be in full swing. Corporate profits and other indicators point to a solid economy, yet even a strong economy has risks. The most talked-about risk at the moment is the state of inflation. After over a decade of minimal inflation, fears of inflation are causing investors some uncertainty. Nobody really knows for sure if inflation will hit, and if so how severe it will be.  It was expected after all the stimulus poured into the economy during the financial crisis from 2008-2010, but never materialized. The amount of stimulus added over the last year due to the pandemic far exceeds the amount of the financial crisis. With the money supply expanding, the economy picking up, and a jump in spending many investors feel inflation is inevitable. That has caused interest rates to rise which will impact borrowing costs.   The Dow Jones Industrial Average closed the week at 34,207.84, down 0.5% from 34,382.13 last week. It is up 11.8% year-to-date. The S&P 500 closed the week at 4,155.86, down 0.4% from 4,173.85 last week. It is up 10.6% year-to-date. The NASDAQ closed the week at 13,470.99, up 0.3% from 13,429.98 last week. It is up 4.6% year-to-date.

U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 1.63%, unchanged from 1.63% last week. The 30-year treasury bond yield ended the week at 2.33%, down slightly from 2.35% last week. We watch bond yields because mortgage rates often follow treasury bond yields. 

Mortgage rates – The May 20, 2021 Freddie Mac Primary Mortgage Survey reported mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate was 3.00%, up from 2.94% last week. The 15-year fixed was 2.29%, up slightly from 2.26% last week. The 5-year ARM was 2.59%, unchanged from 2.59% last week. 

Home sales figures were released this week for April

 U.S. home sales – The National Association of Realtors reported that existing-home sales jumped 33.9% from the number of homes sold last April. The median price paid for a home in April was $341,600, up 19.1% from last April’s median price of $286,800. There are now 110 straight months of year-over-year increases in the median price. The unsold inventory level is at a 2.4-month supply, down from a 4-month supply one year ago. First-time buyers accounted for 31% of all purchases. Second-home and investor purchases accounted for 17% of all homes sold. Foreclosures and short sales accounted for less than 1% of all homes sold.

California home sales and prices continue to surge in April – The California Association of Realtors reported that existing home sales totaled 458,170 on a seasonally adjusted annualized rate in April. That marked a  month-over-month increase of 2.6% from the number of homes sold in March. Year-over-year the number of sales was up 65.1% from last April when sales dropped over 30% from April 2019 to an annualized rate of just 277,400 homes sold due to the pandemic.  The median price paid for a home in April was $813,980, up 7.4% from March’s $758,990 median price. Year-over-year the median price increased 34.2% from last April when the median price was $606,410. April marked the highest year-over-year gain in prices ever recorded. It should be noted that even though the number of sales was down in April 2020 from the previous April because of the pandemic, the median sales price was up year-over-year, so a 34.2% increase is remarkable. 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 just a 1.6-month supply of homes for sale in April, almost unchanged from a 1.7-month supply in March. There was a 3.4-month supply of homes for sale last April. 

Below please find regional data for Southern California.

Sources:

  1.  Rodeo Realty, Inc.
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