Inflation remains steady and housing activity is gaining momentum as we move through the start of the year. With the Federal Reserve balancing persistent price pressures against a gradually cooling labor market, the economic outlook is being shaped by two major forces: resilient consumer demand and limited housing supply.
Below is your 30,000-foot view of what happened last week—and what to watch next.
Weekly Rate Recap (30-Year Fixed)
Rate change since Monday, January 12:
✅ Market rate (0 points) is flat week-over-week
Mortgage rates held steady over the past week, reflecting a market that continues to digest inflation data, housing activity, and signals from the Federal Reserve.
Key Takeaways From Last Week
1) Inflation Remains Steady and In Line With Expectations
Inflation data came in largely as expected:
- CPI rose 0.3% month-over-month in December
- CPI increased 2.7% year-over-year
- Core CPI rose 0.2% month-over-month
- Core CPI held at 2.6% year-over-year (lowest since early 2021)
Core inflation remains important because it removes more volatile categories like food and energy, giving a clearer picture of underlying price trends.
Want more details on CPI? You can view the official report here:
https://www.bls.gov/cpi/
2) Shelter Continues to Drive Inflation
Housing costs continue to be the largest contributor to inflation trends.
Shelter makes up approximately:
- 35% of headline CPI
- 44% of core CPI
Even modest increases in shelter costs have an outsized influence on the overall inflation picture, which is one reason inflation has proven stubborn despite progress elsewhere.
3) The Fed’s Outlook Remains Balanced
The Federal Reserve continues to walk a careful line:
- Persistent inflation supports a more cautious approach to rate cuts
- Cooling labor market conditions increase pressure to ease policy
Fed Chair Powell reiterated that there is “no risk-free path” forward—meaning policymakers are still weighing the risks of cutting too soon versus waiting too long.
4) Existing Home Sales Are Strengthening
Existing home sales showed improved activity:
- Up 5.1% month-over-month
- Up 1.4% year-over-year
- Strongest pace in nearly three years
This gain came even as inventory dropped sharply for the month, which suggests that buyer demand is still present—especially as affordability improves with better rate levels.
5) New Home Sales Remain Resilient
New home sales held near recent highs:
- 737,000 annualized pace
This strength is still being supported by earlier declines in mortgage rates. However, there’s a key challenge: the supply of completed, move-in-ready homes remains limited.
6) Housing Supply Constraints Continue
Most of the available new home inventory is either:
- under construction, or
- not yet started
That creates a major supply bottleneck. If demand increases further, limited available inventory could contribute to upward pressure on prices.
7) Labor Market Shows “Low-Fire, Low-Hire” Conditions
Jobless claims declined modestly, but remain elevated compared to earlier in the cycle.
This continues to align with a “low-fire, low-hire” environment—meaning fewer layoffs, but also less aggressive hiring, which supports the narrative of a gradually cooling labor market.
8) Wholesale Inflation Was Mixed
Producer prices were steady overall:
- PPI rose 0.2% month-over-month
- Up 3% year-over-year
- Core PPI was flat month-over-month
Energy was a notable driver of wholesale inflation, while underlying price pressures in other categories remained stable.
9) Consumer Spending Rebounded
Retail sales showed renewed strength:
- Retail sales rose 0.6% month-over-month
- Gains were broad-based
This suggests consumers remained active heading into the holiday shopping season, supporting continued economic resilience.
What We’re Watching Next Week
More housing-related data arrives midweek:
📌 Wednesday: Pending Home Sales (December)
📌 Thursday: Jobless Claims
Plus several key data releases delayed due to the government shutdown, including:
- Final reading of Q3 GDP
- October & November PCE inflation reports
Final Thoughts
Inflation has continued to cool gradually, but shelter costs remain a key driver keeping price pressures elevated. Meanwhile, housing activity is showing real signs of improvement as buyers adjust to better rate levels and the market transitions into early-year momentum.
As always, we’ll be on standby to help when needed.
Cheers,
Drew (& Team)
