Economic update for the week ending September 10, 2022

Stock markets had a great week?- Stock markets snapped a?three-week?losing streak and finished the week sharply higher. As investors weigh the impact of higher interest rates, high inflation, and the risk of recession, they just don’t see the negative data they expected. The jobs market is strong with exceptional job growth and an abundance of open jobs. Companies have not pulled back on hiring despite higher borrowing costs. As household?savings,?which hit a high during the pandemic, mainly due to stimulus, have dropped, we are beginning to see more people returning to the workforce. The?workforce?participation rate improved in August. Schools re-opening is also a factor in more people returning to work. Consumer spending which accounts for nearly 70% of the?economy,?is still strong. Consumers have not been persuaded to pull back on purchases despite higher interest rates and prices, and with little fear that they will become?unemployed,?that doesn’t seem to be changing any time in the future. Supply chain shortages caused by shutdowns have improved and inventories are beginning to return to normal levels. Empty shelves, long wait times for goods, and not being able to purchase certain items seem to be behind us. For most?sectors,?corporate profits exceeded expectations in the second quarter. Investors now feel that when the Federal Reserve is finally successful in slowing the economy to curb inflation any recession won’t be severe.?

• The Dow Jones Industrial Average closed the week at 32,151.71, up 2.7%?from?31,318.84 last week. It is down 11.5% year-to-date.??
• The S&P 500 closed the week at 4,067.36, up 3.6%?from 3,924.42 last week. The S&P is down 14.7% year-to-date.?
• The NASDAQ closed the week at 12,112.32, up?4.1%?from?11,630.87 last week. It is down 22.6% year-to-date.?

U.S. Treasury bond yields - The 10-year treasury bond closed the week yielding 3.33%, up?from 3.20% last week.??The 30-year treasury bond yield ended the week at 3.47%, up?from 3.35% last week. We watch bond yields because mortgage rates often follow treasury bond yields.?

Mortgage rates?– The?Freddie Mac Primary Mortgage Survey?reported that mortgage rates as of September 8, 2022, for the most popular loan products were as follows:?

• The 30-year fixed mortgage rate was 5.89% up?from 5.66% last week.?
• The 15-year fixed was 5.16% up?from?4.98% last week.?
• The 5-year ARM was 4.74%, up?from 4.51% last week.

Rates ended the week even higher. For all the reasons above that the economy and?the job?market?have?remained strong, the risk of inflation is greater. That leads to higher rates.?

August home sales reports will be released in the next two weeks by the California Association of Realtors and the National Association of Realtors. We expect the number of sales to be about 30% lower than they were last August in California and about 25% lower than a year ago nationally. We expect year-over-year prices to be almost unchanged in California and about 5% higher nationally based on our conversations with our affiliate real estate companies throughout the country. You can get August home sales data for your city or zip code from our website now. Go to?www.tinalucarelli.RodeoRe.com?and select market reports. You can order them to be automatically sent to you monthly if you wish. The smaller the area you search, the fewer the number of sales. That often won’t give you a big enough sampling to get an accurate median price. Pay more attention to the graph with year-over-year price per square foot in areas with a low number of sales to get an indication of home prices.

Have a great weekend!?