Housing and economic updates – Wells Fargo

  • Mortgage rates climbed nine basis points to 6.69% during the week ending January 25. Rates averaged 6.64% in January, down from 6.82% in December and 7.44% in November. The 7.79% rate during the week of October 26 was its highest level since November 2000. The rate quoted is the average of 30-year fixed-rate conforming mortgages submitted to Freddie Mac.1

 

  • Existing home sales slid 1.0% in December to an annualized sales rate of 3.78 million units, its slowest monthly pace since 2010. Sales have declined in all but two of the last 23 months. According to preliminary data, sales in 2023 totaled 4.09 million units, the lowest annual figure since 1995. Because the sales rate counts closings, December sales generally reflect contracts signed in October and November, when mortgage rates were significantly higher than they are today.2

  • New home sales rose 8.0% in December to 664,000 units at a seasonally adjusted annual rate. Combined with a 25,000-unit upward revision to November’s sales pace, this led to the year ending on a positive note. Sales for 2023 totaled 668,000 units, according to preliminary estimates, a gain of 4.8% over 2022.3
  • Housing starts fell 4.3% in December to an annual rate of 1.46 million units. Preliminary data for 2023 show an 11.7% drop in total starts over 2022; single-family starts in 2023 declined 6.9% from 2022. Nevertheless, total starts were up 21.9% in 2023 over its 2015-19 average annual level. Single-family starts were up 10.6% in 2023 relative to the same period.4

  • The Producer Price Index for final demand declined for the third consecutive month in December, edging 0.1% lower. The change in 2023, measured December to December, was 0.9%, down from 2022’s 6.4% increase. Producer prices surged at a 6.8% annual rate during the third quarter, helping to fuel inflation worries during the fall. The 2.6% annual rate of decline in the index during the fourth quarter helped reverse the growing concern about inflation.5

  • According to the GDP preliminary figures, the economy expanded at a 3.3% annual rate in the final quarter of 2023, a deceleration from the third quarter’s 4.9% pace but still above the average annual rate of 2.5% during 2015-19.3.6%.6
  • Residential investment, a component of GDP, fell at a 3.8% annual rate during the first half of 2023 but rose at a 3.7% pace during the second half – leaving it just where it started the year. The 0.0% growth for the year was an improvement over the 17.4% decrease in residential investment during 2022.6
  • Industrial production rose 0.1% in December, generating a 1.0% gain for 2023 (December over December). Still, even with the small gain in December, production dropped at a 3.2% annual rate during the fourth quarter.7
  • Retail sales rose 0.6% in December and were up 5.6% over December 2022. A weak October pulled down the annual growth rate from 8.8% in the third quarter to 2.6% in the fourth quarter.8

 

Source: Keeping Current produced by the Customer Experience, Sales & Service Support team of Wells Fargo Home Mortgage, Daniel Hester, January 26,2024

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