Stock markets close the month higher - We saw stocks edge out gains on mixed economic data this month. The GDP (gross domestic product), the broadest measurement of all goods and services produced in a county, rose just 1.1% annually in the first quarter of 2023. That indicated the economy was slowing, as it was closer to a 3% annualized increase in previous quarters. Inflation, while moderating, has not dropped as quickly as the Fed or economists have hoped. The CPI (consumer price index), the government's broadest measure of inflation, showed that consumer prices were 5% higher in March than last March. While more elevated than the Fed's 2% target range, 5% was the lowest annual consumer price increase in a year. It peaked at 9.1% in June and has steadily slowed. The Core PCE (personal consumption index), which strips out food and energy, rose 4.6% compared to one year ago. That was higher than the 4.5% increase that analysts expected, indicating that inflation is not coming done as quickly as the Fed wants. The Core PCE is the Fed's preferred gauge of inflation.
Hiring has also been robust. Despite almost a year of rate hikes designed to slow the economy and raise corporate borrowing costs to slow hiring and wage growth, the unemployment rate was just 3.5%, a near 60-year low in March. The ECI (Employment Cost Index) rose 1.2% in the first quarter of 2023. That was also above analyst expectations. The ECI is something the Fed looks at to control consumption. Higher wages lead to more consumer spending, which fuels inflation. These reports made investors fear that the likelihood of a Fed rate hike in May is higher. After these reports were released, experts placed the possibility of a ¼% rate hike at over 70% on the last day of the month. First quarter profit reports have been robust. So far, 51% of companies have reported, and 79% reported profits above expectations. While the banking crisis seems to have subsided, First Republic Bank was taken over by the FDIC, placed in receivership, and sold to JP Morgan Chase. This happened over the weekend and was announced in the early morning of Monday, May 1, 2023. The Dow Jones Industrial Average closed the month at 34,098.16, up 5.7% from 32,274.15 on March 31, 2023. It is up 2.8% year-to-date. The S&P 500 closed the month at 4,169.48, up 3.5% from 4,109.31 last month. It is up 8.6% year-to-date. The NASDAQ closed the month at 12,226.58, up 6.7% from 12,221.91 the previous month. It is up 16.8% year-to-date.
U.S. Treasury bond yields - The 10-year treasury bond closed the month yielding 3.44%, down slightly from 3.48% last month. The 30-year treasury bond yield ended the month at 3.67%, unchanged from 3.67% last month. We watch bond yields because mortgage rates often follow treasury bond yields.
Mortgage rates - The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of April 27, 2023, were as follows: The 30-year fixed mortgage rate was 6.43%, up from 6.32% at the end of February. The 15-year fixed was 5.71%, up from 5.56% last month.
The jobs report is released on the first Friday of the month. Home sales figures are released on the third week of the month by the California Association of Realtors and the National Association of Realtors. These are the March employment and home sales data.
The unemployment rate fell to near a 60-year low in March - The Department of Labor and Statistics reported that 336,000 new full-time jobs were added in March. The unemployment rate fell to 3.5%, except for January's 3.4% rate, which would be a 60-year low. The Federal Reserve wants an unemployment rate in the 4.25% range to cool inflation. Before 2019 that rate was considered full employment. The labor-force participation rate (the share of workers with a job or actively looking for an appointment) was 62.6% in March, its highest level since the pandemic's start, yet still well below 63.4% before the pandemic. Average hourly wages increased by 4.2% from one year ago. That was the smallest year-over-year increase since January 2021.
U.S. existing-home sales - The National Association of Realtors reported that existing-home sales totaled 4.44 million units on a seasonally adjusted annualized rate in March, down 22%from an annualized rate of 5.69 million in March 2022. The median price for a home in the U.S. in March was $357,700, down 0.9% from $379,300 one year ago. There was a 2.6-month supply of homes for sale in March, up from a 2-month supply last March. First-time buyers accounted for 28% of all sales. Investors and second-home purchases accounted for 17% of all sales. All-cash purchases accounted for 27% of all sales. Foreclosure and short sales accounted for 1%of all sales.
California existing-home sales - The California Association of Realtors reported that existing-home sales totaled 281,050 on a seasonally adjusted annualized basis in March, down 34.2%from 427,040 homes on an annualized basis last March. The statewide median price for a home in March was $791,490, up 7.6% from $735,480 in February but down 7% from $851,130 one year ago. There was a 2.2-month supply of homes for sale in March, the lowest home inventory level since May 2022. That represented a historic monthly drop in available homes for sale from a 3.2-month supply in February. March closed sales represent homes that went into escrow in January and February. With such a shortage of homes for sale, we have seen multiple offers and bidding wars, as in early 2022. It appears that the median price will keep increasing from its low in February, but we don't know if they will reach their peak of $900,000 set last May.
The graph below shows sales data by county in Southern California.
