Dec 2 2022 38376 1

Dated: December 2 2022

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Economic update for the month ending October 31, 2022

Stocks surged in October- To say stock markets are volatile is an understatement. The Dow had its biggest gain since January 1976 in October, rebounding from its lows for the year in September, which marked the worst month for the Dow since March of 2020, when the pandemic shut-down was announced. The S&P and NASDAQ also had a strong October. They both had their worst month since 2002 in September. While inflation saw few signs of moderating and interest rates rose to the highest levels since 2002, the nation's GDP increased 2.6% year-over-year, the unemployment rate hit a 32-year low, and third quarter corporate profits came in mostly higher than expected. With such a strong jobs market, consumers out spending and trillions of stimulus remaining to go out over the next decade, investors feel that any recession will be mild. Then again, we saw the worst month in decades in June, followed by the best month in decades in July as well. There is no way to predict what will happen in the stock markets given the monthly volatility we have seen in 2022. The sectors that have been hit extremely hard are the real estate market which has not been able to sustain the dramatic increase in interest rates, and the tech sector, with the exception of Apple, who reported strong profits.

The Dow Jones Industrial Average closed the month at 32,732.95, up 14%from 28,725.51 on June 30. It's down 11.6% year-to-date.The S&P 500 closed the month at 3,871.98, up 8% from 3,585.62last month. The S&P is down 20% year-to-date.The NASDAQ closed the month at 10,988.15, up 3.9%from 10,575.62 last month. It is down 29.8% year-to-date.

U.S. Treasury bond yields - The 10-year treasury bond closed the month yielding 4.10%, upfrom 3.83% last month.The 30-year treasury bond yield ended the month at 4.22%, upfrom 3.75% 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 October 27, 2022 for the most popular loan products were as follows:The 30-year fixed mortgage rate was 7.08%, upfrom 6.70% at the end of September.The 15-year fixed was 6.36% up from5.96% last month.The 5-year ARM was 5.96% upfrom 5.30% last month.

The U.S. economy added 263,000 new jobs in September - The unemployment rate dropped to a 52-year low - The Department of Labor and Statisticsreported that 263,000 new jobs were added in September. Theunemployment ratedropped to3.5%, a 52-year low, from 3.7% in August. Thelabor-force participation rate(the share of workers with a job or actively looking for a job) increased slightly to 62.3%. It was62.4% in August, 62.1% in July, and 63.6% before the pandemic. Average hourlywages increased 5% from one year ago. More open jobs than workers looking for work is pushing wages up at a higher pace than we have seen in decades because businesses have to compete for workers rather than workers competing for jobs. In September, there were1.7 job openings for every applicant, down from 2.1 job for every applicant last month. The unexpected drop in the unemployment rate, and wages continuing to rise led to a sell off in stock markets after the report was released. October figures will be released this Friday and included in the week ending report on Saturday.

Home sales figures are released on the third week of the month for the previous month. September sales figures are below.

U.S. existing-home sales - The National Association of Realtorsreported thatexisting-home sales totaled 4.71 million unitson a seasonally adjusted annualized rate inSeptember, down 1.5%month-over-month from the annualized number of sales in August.Year-over-yearsales weredown 23.3%from an annualized rate of 6.18 million in September 2021. Themedian pricefor a home in the U.S. in September was$384,800, up 8.4%from $361,500 one year ago.Month-over-month, the median price dropped for a third month from the all-time high of $413,800 in June. September marked a record 127 consecutive months of year-over-year increases in the median price. There was a3.2-month supply of homes for salein September, up from a 2.4-month supply last September.First-time buyers accountedfor29%of all sales.Investors and second-homepurchases accounted for15%of all sales.All-cashpurchases accounted for22%of all sales.Foreclosure and short salesaccounted for2%of all sales.

California existing home sales - The California Association of Realtorsreported thatexisting-home sales totaled 305,680, on a seasonally adjusted annualized basis inSeptember, down 30.2% from September 2021, when 438,190 homes sold on an annualized basis.Year-to-dateexisting-home sales aredown 16.5%. The statewidemedian pricepaid for a home in September was$821,680,up 1.6% from $808,890 in September 2021. There was a2.9-month supply of homes for sale in September, down from a 1.9-month supply one year ago.

The highest interest rates since 2008 have dramatically reduced the number of sales and caused prices to moderate. The number of sales is down 30% from last year's pace. We are seeing the lowest number of sales since the financial crisis when home financing had the most stringent qualifying requirements ever. We expect this low number of sales to continue through the end of 2023. Home prices, which were up by over 10% year-over-year in May, are now just slightly higher than one year ago. Prices are down about 10% from their peak in May. Higher interest rates have made homes less affordable, but the decline in prices has created a good opportunity for buyers. The bidding wars we saw earlier in the year are less prevalent. Most homes are no longer selling with multiple offers. Only homes priced at last year's levels are selling. Experts feel that interest rates have peaked and will be lower in 2023 and 2024. That makes it a good time to buy! Basically, the drop in price more than makes up for the higher payment until rates drop and buyers can refinance.

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