Aug 3 2022 38376 1

Dated: August 3 2022

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Economic update for the month ending July 30, 2022

Stock markets had the best July in decades- Stock markets ended the month with a stellar week despite a .75% rate hike by the Fed and a second quarterly decline in GDP. The Fed hiked its key interest rates by .75% on Wednesday. Some investors feared a full one percent rise after the strong jobs report for June and the CPI increase of 9.1% announced earlier in the month. Fed Chairman Powell also issued remarks that led investors to believe that future rate hikes will be smaller and less often. He stated that the Fed has moved from accommodative to neutral interest rate levels. This tightening has been at the quickest pace ever. The Federal Funds rate is now 2.25%-2.5%, up from 0%-.25% in February. The rate was 1.50%-1.75% before the pandemic and was dropped to 0%-25% when the shutdowns were announced. You have to take the quickest pace with a grain of salt due to the drastic drop to near zero percent at the start of the pandemic that lasted almost two years. The second quarter Gross Domestic Product (GDP) dropped 0.9%, its second consecutive quarter of contraction. This also supported that interest rate hikes were working to slow the economy to combat inflation. Oil prices also dropped 6.9% in July. Second quarter corporate profits also came in strong with 72% of companies exceeding expectations. Energy companies reported record profits. Amazon, Microsoft, and Apple also reported stellar profits. All in all July marked the strongest July in years and the strongest July jump in the S&P since 1939. This followed the weakest June in decades.

The Dow Jones Industrial Average closed the month at 32,845.13, up 6.7%from 30.778.43 on June 30. It's down 9.6% year-to-date.

The S&P 500 closed the month at 4,130.29, up 9.1% from 3,785.39last month. The S&P is down 13.3% year-to-date.

The NASDAQ closed the month at 12,390.69, up 12.4%from 11,028.74 last month. It is down 20.8%, year-to-date.

U.S. Treasury bond yields - The 10-year Treasury bond closed the month yielding 2.67%, downfrom 2.98% last month.

The 30-year Treasury bond yield ended the month at 3.00%, downfrom 3.14% last month. We watch bond yields because mortgage rates often follow Treasury bond yields.

Mortgage rates- TheFreddie Mac Primary Mortgage Surveyreported that mortgage rates as of July, 28, 2022 for the most popular loan products were as follows:The 30-year fixed mortgage rate was 5.30%, downfrom 5.79% at the end of June.The 15-year fixed was 4.58% down from4.83% last month.The 5-year ARM was 4.29% downfrom 4.50% last month.

The July jobs report will be released on Friday August 5, 2022. That will be a good indicator of whether the fed rate hikes are causing employers to slow the pace of hiring.

The U.S. economy added 372,000 new jobs in June - The Department of Labor and Statisticsreported that372,000 new jobswere added in June. That exceeded experts expectations by 100,000 jobs! They expected interest rate hikes and other tightening measures by the Fed to slow the overheated economy to slow hiring. So far these measures have not slowed the robust pace of job growth.

Theunemployment rateheld steady at3.6%which is just slightly higher than the 52-year low of 3.5% just before the pandemic. Thelabor-force participation rate(the share of workers with a job or actively looking for a job) was62.2%in June, down from 62.5% in May. It is well below the 63.6% level before the pandemic. Experts are puzzled as to why more workers are not returning to the workforce, especially with wages up, pandemic stimulus running out, and so many available job openings. Survey data reported that there were 11.3 million available Jobs which amounted to about 2 positions for every job seeker. Average hourlywages increased 5.1% from one year ago.Wages were up 5.2% year-over-year in May and 5.5% year-over-year in April which may be a sign that inflation may be moderating.

Home sales data is released on the third week of the month for the previous month. These are June's results.

U.S. existing-home sales - The National Association of Realtorsreported thatexisting-home sales totaled 5.4 million unitson a seasonally adjusted annualized rate inJune, down 5.4%month-over-month from the annualized number of sales in May. Year-over-year sales were down 14.3% from the annualized rate of 5.97 million in June 2021.

Themedian priceof a home in the U.S. in June was$416,000 up 13.4%from $366,900 one year ago. June marked a record 124 consecutive month of year-over-year increases in the median price. There was a3-month supply of homes for salein June, up from a 2.5 month supply last June.First-time buyersaccounted for30%of all sales.Investors and second-homepurchases accounted for14%of all sales.All-cashpurchases accounted for25%of all sales.

Foreclosure and short-salesaccounted forless than 1%of all sales, remaining at a historic low.

California existing-home sales - The number of single family homes sold in June declined 21% year-over-year -The California Association of Realtorsreported thatexisting-home sales totaled 344,970on a seasonally adjusted annualized rate in June,down 8.4% from May, and down 20.9% from last June.Excluding two months during the pandemic shutdown, this marked the fewest number of homes closed escrow in a month since April 2008. Existing-home sales through June were down 10.9% from the number of homes sold in the first half of 2021. The statewidemedian-price paid for a home in June was $863,790, up 5.4% from $819,630 in June 2021.There was a2.5-month supply of homes for sale in June,up from a 2.1-month supply of homes for sale in May, and a 1.7 month supply in June 2021. While up slightly a 2.5-month supply is still a low level. A normal market has a 5-6 month supply of homes on the market.

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