Economic news this month – Treasury bond yields and mortgage interest rates jumped in October as data indicated that the economy was picking up steam. The month began with a jobs report showing that 254,000 new jobs were added in September. That shocked experts who estimated that there would be 160,000 new jobs added. Wages increased as well showing a 4.2% annual increase, up from a 3.8% annual increase in the previous three months. Retail sales and consumer confidence jumped as well. The third quarter Gross Domestic Product initial estimate showed that the economy grew at a healthy rate of 2.8% in the quarter. The general consensus had been that the economy was slowing, especially after July’s weak hiring number and a jump in the unemployment rate, but this data suggested that the economy was picking up steam. When the economy picks up consumers spend money which could ignite inflation. Fortunately, the inflation indexes were in line with expectations. The September Consumer Price Index (CPI) and the Producer Price Index (PPI) were released. The CPI, one of the broadest measures of inflation showed that consumer prices increased 2.4% from one year ago, down from a 2.5% annual increase in August. The 2.4% increase in September marked the smallest annual increase in inflation since February 2021. The PPI, a measure of wholesale prices, showed prices for goods and services that producers pay increased 1.8% from last September. The Personal Consumption Expenditures Price Index (PCE), a fed favorite, showed a 2.1% year-over-year increase, its smallest increase since early 2021. The question for investors is whether the news of higher wages, the unemployment rate beginning to drop again from its July high, consumer confidence and retail sales rising could reverse the trend of inflation dropping to acceptable levels in the coming months. Many felt the answer was yes and bond yields and mortgage rates surged. In fact, treasury bond yields increased so much that the Dow, NASDAQ, and S&P which all hit record highs in October following six straight weeks of gains, dropped at the end of the month to close the month lower on long-term interest rate fears.
The graph below shows the history of the Consumer Price Index since 2021.
Stock Markets – The Dow Jones Industrial Average closed the month at 41,763.46,down 1.3% from 42,330.15, on August 31, 2024. It is up 10.8% year-to-date. The S&P 500 closed the month at 5,705.45, down 1% from 5,762.58 last month. It is up 19.6% year-to-date. The NASDAQ closed the month at 18,085.15, down 0.6% from 18,189.17 last month. It is up 20.5% year-to-date.
U.S. Treasury bond yields – The 10-year treasury bond closed the month yielding 4.28%, up from 3.81% last month. The 30-year treasury bond yield ended the month at 4.47%, up from 4.14% last month. We watch bond yields because mortgage rates often follow treasury bond yields.
Mortgage rates – Mortgage rates jumped in October on fears of inflation picking up in future months based on stronger economic reports. Every Thursday Freddie Macpublishes 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 October 31, 2024, were as follows: The 30-year fixed mortgage rate was 6.72%, up from 6.08% at the end of September. The 15-year fixed was 5.99%, up from 5.16% 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 California Association of Realtors and the National Association of Realtors. These are September’s home sales figures.
U.S. existing-home sales September 2024 – The National Association of Realtorsreported that existing-home sales totaled 3.84 million units on a seasonally adjusted annualized rate in September, down 3.5% from an annualized rate of 3.98 million units last September. The median price for a home sold in the U.S. in September was $404,500, up 3% from $392,700 one year ago. There was a 4.3-month supply of homes for sale in September, up from a 3.4-month supply one year ago. First-time buyers accounted for 26% of all sales. Investors and second-home purchasesaccounted for 18% of all sales. All cash purchases accounted for 30% of all sales. Foreclosures and short sales accounted for 2% of all sales.
September California existing-home sales report – The California Association of Realtors reported that existing-home sales totaled 253,010 on an annualized rate in September, down 3.4% from 262,050 homes on an annualized rate in August, yet up 5.1% from a revised 240,840 homes sold on an annualized basis last September. The statewide median price paid for a home in September was $868,150, down 2.3% from $888,740 in August, and up 2.9% from $843,500 one year ago. There was a 3.6-month supply of homes for sale in September, up from a 3.2-month supply in August, and up from a 2.8-month supply in September 2023.
The graph below lists home sales data by county in Southern California.
