August marked an official change in policy for the Federal Reserve as Fed Chairman Jerome Powell stated, “The time to cut rates has come,” following the Fed’s annual conference in Jackson Hole. The first-rate cut is expected in September. This month every inflation indicator showed that inflation was taming. July’s inflation reports came in as follows: The Consumer Price Index showed consumer prices rose 2.9% from one year ago. The Producer Price Index showed that wholesale prices rose 2.2% from one year ago. The Personal Consumption Expenditures Price Index, a favorite of the Fed showed a 2.5% year-over-year increase. The second quarter Gross Domestic Product, the broadest measure of the strength of the economy was revised upward from an initial estimate of 2.8% to a 3% increase. The August jobs report will be released next Friday. The Fed is watching employment closely in determining how much and how far to cut rates. They have indicated that the first cut will be in September.
The graph below shows the CPI rate from 2021 to now.
Stock Markets – The Dow Jones Industrial Average closed the month at 41,563.08, up 1.8% from 40,842.79, on July 31, 2024. It is up 10.3% year-to-date. The S&P 500 closed the month at 5,648.40, up 2.3% from 5,522.30 last month. It is up 18.4% year-to-date. The NASDAQ closed the month at 17,713.63, up 0.1% from 17,599.40 last month. It is up 18% year-to-date.
U.S. Treasury bond yields – The 10-year treasury bond closed the month yielding 3.91%, down from 4.09% last month. The 30-year treasury bond yield ended the month at 4.20%, down from 4.35% last month. We watch bond yields because mortgage rates often follow treasury bond yields.
Mortgage rates reached their lowest levels in over a year – Every Thursday Freddie Mac publishes interest rates based on a survey of mortgage lenders throughout the week. The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of August 19, 2024, were as follows: The 30-year fixed mortgage rate was 6.35%, down from 6.78% at the end of May. The 15-year fixed was 5.51%, down from 6.07% last month.
The graph below shows the trajectory of mortgage rates over the past year.
Freddie Mac was chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing. Their mandate is to provide liquidity, stability, and affordability to the U.S.
Home sales data is released on the third week of the month for the previous month by the National Association of Realtors and the California Association of Realtors. These are July’s home sales figures.
U.S. existing-home sales July 2024 – The National Association of Realtors reported that existing-home sales totaled 3.95 million units on a seasonally adjusted annualized rate in July, down 2.5% from an annualized rate of 4.05 million last July. The median price for a home in the U.S. in June was $422,600, up 4.2% from $410,109 one year ago. There was a 4-month supply of homes for sale in June, up from a 3.3-month supply one year ago. First-time buyers accounted for 29% of all sales. Investors and second-home purchases accounted for 13% of all sales. All cash purchases accounted for 27% of all sales. Foreclosures and short sales accounted for 1% of all sales.
July California existing-home sales report – Prices down slightly from June, but up 6.5% from one year ago – The California Association of Realtors reported that existing-home sales totaled 278,810 on an annualized rate in July, up 4.7% from a revised 268,840 homes sold on an annualized basis last July. There was a 2.9-month supply of homes for sale, up from a 2.5-month supply one year ago. The statewide median price paid for a home in July was $886,560, down 1.6% from $900,720 in June and, up 6.5% from $832,530 one year ago.
