Fed Chair Powell Says Central Bank Will Stay the Course… In his testimony to Congress, Powell said that the central bankers want to see substantial progress in the labor market and inflation near its 2% target before they consider changing monetary policy.
What it means— The central bankers have their hands full. The economy is bouncing back as much as can be expected with economic limitations still in place, and Congress is considering pouring in another $1.9 trillion. To the casual observer, this might look like the Fed has done its job of filling in the big economic hole last year and can now dial back its bond buying while gently raising short-term rates. But politicians have moved the goalposts. Congress borrowed a ton of money to fund relief efforts and plans to borrow more, and most of that debt matures in less than five years.
Legislators are counting on the Fed to hold short rates low so that government interest costs don’t shoot higher. At the same time, the new administration is laser focused on equity across communities on different fronts, including employment. Powell has noted several times in the last month that he wants to see a strong labor market before considering a change in monetary policy. Expect the central bankers to stand aside at least through 2021 and likely through the first half of 2022 before they make a move. Expect rates beyond five years to creep higher, which might slow down the real estate market just a bit.
January New Home Sales Rose 4.3%, Up 19% Over Last Year… The Midwest region led in new home sales last month, with sales up 12.6%.
What it means— We can’t rely on home sales data during the winter months because of seasonality, but the trend remains positive. There are several factors, both positive and negative, that we need to watch. Spurred on by the pandemic and the work-from-home trend, many Millennials are taking the plunge and becoming homeowners. They’ve been hampered by a lack of inventory, but that might change as the vaccine rolls out and we get closer to herd immunity. A new survey from Zillow found that 70% of current homeowners would feel comfortable moving after the pandemic ends, compared with just 52% who feel that way today. As the economy opens up, we could see more inventory hit the market. On the flip side, rising mortgage rates and soaring material costs are pushing prices and monthly mortgage payments higher, which reduces affordability.
Durable Goods Orders Shoot Higher, Up 3.4% … The January gain was the largest in six months and brings goods orders back to pre-crisis levels.
What it means— Excluding transportation, where commercial aircraft orders rose 390% and car and truck orders fell a touch, durable goods orders increased 1.4%. That might be less than half of the headline number, but it’s still a great showing. Durable goods excluding aircraft and defense spending, which is a proxy for business spending, rose for the ninth consecutive month, up 0.5%. Consumers and businesses are buying durable goods, items that last three months or longer, at a fast clip. Just imagine how much we will spend when the economic sanctions go away.
Disney+ Streaming Service Puts Warning Label on the Muppets… Who knew that Jim Henson’s fuzzy, lovable creations were traumatizing? Disney+ now includes a warning for 18 episodes of The Muppets that reads, “This program includes negative depictions and/or mistreatment of people or cultures. These stereotypes were wrong then and are wrong now. Rather than remove this content, we want to acknowledge its harmful impact, learn from it and spark conversations to create a more inclusive future together.” It’s almost as if you could find offense in anything if you looked hard enough.
Data supplied by HS Dent Research
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