Month: January 2022

Economic Update For The Year Ending December 31, 2021

Stock Markets had another stellar year in 2021 – While the world did not return to normal from the full effects of the pandemic it did come a long way from the complete shutdown in 2020. A full economic reopening, trillions of dollars in stimulus, and historically low-interest rates buoyed stocks to record levels. For example, the S&P hit 70 record highs this year marking the most record-high closings in 25 years! At the same time COVID-19 cases had two surges during the year, the world suffered a supply shortage due to factory closings during the pandemic, there was a labor shortage as the labor participation rate (the number of working-age people working or looking for work) dropped to historic low levels, and inflation rose to the highest levels since 1982. After many years of historic rises in stock prices, we will see if inflation and higher interest rates impact stock markets in 2022 or if we have another year of dramatic gains.  The Dow Jones Industrial Average ended the year at 36,338.30, up 18.7% from 30,606.48 at the close of 2020. The S&P 500 closed the year at 4,766.18, up 26.9% from 3,756.07 at the end of 2020. The NASDAQ closed at 15,644.97, up 21.4% from 12,888.28 on December 31, 2020. 

U.S. Treasury Bond Yields rise to pre-pandemic levels in 2021 – The 10-year U.S. treasury bond yield closed the year at 1.52%, up from 0.93% On December 31, 2020. The 30-year treasury yield ended the year at 1.90%, up from 1.65% on Dec. 31, 2020. 

Mortgage Rates finished the year higher than the all-time low levels due to the pandemic but still near historic low levels – December 30, 2021, Freddie Mac Primary Mortgage Survey reported that the 30 year fixed rate mortgage average was 3.11%, up from 2.67% on December 28, 2020. The 15-year fixed was 2.33%, up from 2.17% last December.  The 5-year ARM was 2.41%, down from 2.71% at the close of 2020. 

For the month ending December 31, 2021

The Dow Jones Industrial Average closed the month at 36,338.30, up 5.4% from 34,483.72 at the end of September. It is up 12.7% year-to-date. The S&P 500 closed the month at 4,766.18, down 4.4% from 4,567.00 last month. It is up 21.6% year-to-date. The Nasdaq closed the month at 15,644.97, up 2.1% from 15,537.69 last month. It is up 20.6% year-to-date.

U.S. Treasury bond yields – The 10-year treasury bond closed the month yielding 1.52%, up from 1.43% last month. The 30-year treasury bond yield ended the month at 1.90%, up from 1.78% last month. We watch bond yields because mortgage rates often follow treasury bond yields. 

Mortgage rates – The December 30, 2021, Freddie Mac Primary Mortgage Survey reported mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate was 3.11%, almost unchanged from 3.10% last month. The 15-year fixed was 2.33%, down from 2.42% last month. The 5-year ARM was 2.41%, down from 2.47% last month. 

For the week ending January 1, 2022

 Stock Markets – On Wednesday the S&P 500 hit its 70th record high of the year before declining on Thursday and Friday. This was due to the rapid pace of the spread and hospitalizations in the latest surge of COVID-19. The Dow Jones Industrial Average closed the week at 36,338.30, up 1.1% from 35,950.56 last week. It is up 18.7% year-to-date. The S&P 500 closed the week at 4,766.18, up 0.9% from 4,725.79 last week. It is up 26.9% year-to-date. The NASDAQ closed the week at 15,644.97, down 0.1% from 15,653.37 last week. It is up 21.4% year-to-date.

U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 1.52%, almost unchanged from 1.50% last week. The 30-year treasury bond yield ended the week at 1.90%, also almost unchanged from 1.91% last week. We watch bond yields because mortgage rates often follow treasury bond yields. 

Mortgage rates – The December 30, 2021, Freddie Mac Primary Mortgage Survey reported mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate was 3.11%, up from 3.05% last week. The 15-year fixed was 2.33% up slightly from 2.30% last week. The 5-year ARM was 2.41%, up from 2.37% last week. 

U.S. employers added 210,000 jobs in November – The Department of Labor and Statics reported that 210,000 new jobs were added in November. It was the fewest monthly number of jobs added this year and less than half of the 500,000 new jobs economists’ expected. Average hourly wages rose 4.8% year-over-year. The labor-force participation rate (the share of workers with a job or actively looking for a job) increased two-tenths of one percent from October’s level to  61.8%. It remains sharply below the 63.6% level before the pandemic. The unemployment rate was 4.2% in November, down from 6.7% in November of 2020. The December unemployment report will be released on Friday, January 7, 2022.

U.S. Existing-home sales jump again in November – The National Association of Realtors reported that existing-home sales increased 1.9% in November from the number of sales in October. That marked three consecutive months in month-over-month increases in sales at a time of year when the number of sales would usually decrease. Year-over-year sales were down 2% from one year ago. The median price paid for a home in the United States was $353,900, up 13.3% from $310,800 last November. There have been 117 straight months of year-over-year increases in home prices, the longest-running streak on record. The number of homes for sale was 13.9% below the number of homes for sale in November of 2020. There was a 2.1-month supply of homes available for sale, down from a 2.5 month supply last November. First-time buyers accounted for 26% of all sales. Investors and second-home buyers accounted for 15% of the sales. 24% of the sales were all-cash purchases.

 Foreclosures and short sales accounted for less than 1% of the sales. Existing-home sales include single-family, condominiums, townhouses, and co-ops.

November California existing-home sales – The California Association of Realtors reported that existing-home sales totaled 454,450 on a seasonally adjusted annualized rate in November. That marked a month-over-month increase of 4.7% over the seasonally annualized rate of 434,170 in October. Year-to-date sales are up 10.6% from the same period last year. The median price paid for an existing home in November was $782,440, up 11.9% from last November when the median price was $698,980 There was a 1.6-month supply of homes for sale in November, down from a 1.9 month supply of homes for sale one year ago. 

Below are regional figures. 

 

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