The past week witnessed a blend of economic indicators, revealing unexpected rises in both consumer and wholesale inflation for January. Despite a slowdown in new home construction, home builder confidence reached a six-month high. Retail sales saw a drop at the onset of the year, while job seekers continued facing challenges.

Key Highlights:

Consumer Inflation:

• Consumer Price Index (CPI) rose by 0.3% from December to January, with annual inflation at 3.1%.
• Core CPI increased by 0.4%, maintaining the annual rate at 3.9%.

Wholesale Inflation:

• Producer Price Index (PPI) rose by 0.3% in January, with the annual rate at 0.9%.
• Core PPI increased by 0.5%, with the year-over-year reading at 2%.

Home Builder Confidence:

• National Association of Home Builders (NAHB) Housing Market Index climbed four points to 48, indicating improved sentiment among builders.

Home Construction:

• Housing starts fell by 14.8% in January, hitting a five-month low. However, single-family building permits reached their highest level in a year.

Retail Sales:

• Sales dropped by 0.8% from December to January, with a slight 0.6% increase compared to January 2023.

Job Market:

• Initial jobless claims declined by 8,000, while continuing claims rose by 30,000, suggesting challenges in finding employment.

In summary, the week's data indicates ongoing inflationary pressures, cautious optimism in the housing market, a dip in retail spending, and a mixed job market outlook.

What to Look for This Week:

Federal Reserve Minutes (Wednesday):

• Insights into the Fed's thinking on monetary policy, inflation, and economic conditions are expected from the latest meeting's minutes.

Existing Home Sales (Thursday):

• The report will offer further insight into the housing market, following mixed signals from home builder confidence and new home construction.

Jobless Claims (Thursday):

• The latest report will update on the labor market, focusing on the number of individuals filing for unemployment benefits.

Weekly Real Estate Market Update:

Mortgage Rates:

• Rates are now in the 7% range, slowing down demand for homes.

Home Prices:

• Signs suggest home prices might be softening due to reduced demand.

Inventory:

• More sellers are entering the market compared to last year.

Sales:

• Home sales are slowly rising, but the pace is inconsistent.

Regional Trends:

• Inventory levels vary across regions.

Price Reductions:

• 30% of homes on the market have had a price cut.

Median Prices:

• The median price of single-family homes in the US is $425,000.

Notes:

• More supply could lead to increased home sales in 2024.
• Monitoring sales rate and price reductions is crucial to gauge market trends.
• If mortgage rates fall, sales could pick up significantly.

Hopes for a Federal Reserve pivot and interest rate cuts are fading, with expectations being pushed back. Currently, there's a 61% chance that interest rates will remain at current levels through May, a significant shift from just one month ago when markets were anticipating two rate cuts before the June meeting. Now, the likelihood of no rate cuts until July 2024 is around 22%. Market expectations have also been scaled back from six rate cuts in 2024 to just four, and futures are pricing in five rate cuts through the March 2025 meeting. It seems that the possibility of "higher for longer" interest rates never really disappeared

"Reflecting on 2023, we see the recent rise in foreclosure activity as a market correction rather than a cause for alarm. It signals a return to more traditional patterns after years of volatility,” said Rob Barber, CEO at ATTOM. “Our data suggests that while foreclosure activity may fluctuate, it’s unlikely to approach the highs seen in the last decade. Instead, we foresee a market that is more reflective of broader economic trends, with foreclosure filings becoming a more predictable aspect of the housing landscape. This shift offers a silver lining — the opportunity for investors, homeowners, and industry professionals to plan and strategize with greater confidence and insight.”

Q4 2023 Foreclosure Activity High-Level Takeaways: There was a total of 92,896 U.S. properties with foreclosure filings in Q4 2023, down 8 percent from the previous quarter but up 2 percent from a year ago. Nationwide in Q4 2023, one in every 1,503 properties had a foreclosure filing. States with the highest foreclosure rates in Q4 2023 were Delaware (one in every 903 housing units with a foreclosure filing); New Jersey (one in every 914 housing units); Ohio (one in every 922 housing units); Maryland (one in every 943 housing units); and South Carolina (one in every 995 housing units).