ECONOMIC UPDATE FOR THE WEEK ENDEING November 8, 2014 Jobs - On Friday November 7, the Labor Department released the October Jobs Report. The National Unemployment Rate dropped to 5.8% from 5.9% in September. It was the lowest unemployment level since July 2008. It showed that U.S. Employers added 214,000 jobs in October. That marked the 49th straight month of job gains. If you exclude public sector jobs the number of months of private sector job gains is 56 months. Thomas Parez, the Secretary of Labor reported that the private sector has created 10.6 million private sector jobs in the last 56 months. Among the job gains in October: food services added 42,000, retail added 27,000, manufacturing added 15,000, and construction added 12,000. Wage growth was a little better than September raising 3 cents an hour after being flat in September. Overall wages were up 2% from October of 2013, which is just above the 1.7% inflation rate for the same period. This is not nearly enough to make up ground lost during the great recession. The 214,000 job gain number was lower than the upward revised number of 256,000 September gain number and below expectations, but still considered solid. There have been over 200,000 jobs gained for 9 straight months which is the second best period in history, ranking only behind the 19 month streak from 1993 to 1995. The Fed – Fed chairperson, Janet Yellen weighed in after the jobs report and said that “the Fed is striving to clearly communicate its intentions on interest rates in order to minimize surprises that could disrupt the financial markets.” She said that she “expects the Fed’s first increase of interest rates to be in mid-2015, as the US is finally emerging from the shadows of the great rescission.” Obviously, this is intended to give a timetable on rate increases. Stock Market – Stocks again closed at all-time highs rising on higher than expected corporate profits, solid job gains, and election results, which are thought to be more business friendly. (this is not my opinion of election results. I have no opinion either way!) The Dow Jones Industrial Average closed the week at 17,573.93, up from last weeks close of 17,390.52! The S&P 500 closed at 2031.92 up from last Friday’s close of 2018.05 and the Nasdaq closed at 4632.53, just over last weeks close of 4630.74. The Dow and S&P are at all-time highs while the Nasdaq is at a 14 ½ year high! Treasury Bond Rates – The 10 year treasury bond closed the week at 2.32% down very slightly from last weeks close of 2.35%. Long term home mortgage rates follow bond rates, so this 10 year rate is considered a benchmark rate. Mortgage Rates – Freddy Mac reported that the 30 year fixed mortgage rate average for the week was up slightly from 3.98% last week to 4.02% this week. The 15 year fixed was also up to 3.21% from 3.13 % last week. Freddie Mac and Fannie Mae Profits – Mortgage giants Fannie and Freddy announced that they would be paying a 3rd quarter profit dividend to the US Treasury of $6.8 billion. This brings the total paid to $225.5 billion since the US take over in 2008, which resulted in $188 billion in aid to keep the companies afloat. In the 2012 election there was much talk about how to sell off Fannie and Freddie or get the Treasury out of the mortgage business. This was when the treasury was close to breaking even. Now that they have made a huge profit, expect this to be a topic of conversation, as former stockholders are suing the government feeling they got taken advantage of. Housing Affordability Holds Steady – The California Association of Realtors reported yesterday that lower rates and more moderate home price gains helped keep affordability in check in the 3rd quarter. Home buyers needed a minimum annual combined income of $94,960 to qualify for a purchase of the statewide median priced single family home of $467,700. This was up only slightly from the $93,560 needed for the $457,140 median priced single family home in the 2nd quarter. Santa Monica voters voted down a proposal to raise the Santa Monica City documentary transfer tax on home sales over $1,000,000 from $3 per $1,000 to $9 per $1,000 for the portion of the sale exceeding the $1,000,000. I am glad to see this was overwhelmingly rejected by voters. There is talk in the LA City Council of putting a similar measure on the ballot in LA. Just a reminder, Veteran’s Day will be celebrated on Tuesday next week, not Monday. Banks, title, escrow , and the county recorder will be closed. Make sure your clients plan their close and move accordingly. We are seeing an uptick in open escrows over the last couple of weeks. At the same time I am hearing that showings on homes that are even slightly overpriced have slowed down. It’s odd to have homes priced right receiving multiple offers, while homes just slightly high are not being shown. Pricing which was not as critical in the past few years seems more critical now than ever! I don’t really have a good read on this, as it has not been long enough to determine a pattern. One thing for sure, if you want low interest rates the next few months may be your last opportunity to buy or refinance. The Fed has told us this. When it finally begins sinking in I would not be surprised to see a flurry of activity!
Posted on: Sat, 08 Nov 2014 23:49:30 +0000
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