US Residential Builder Confidence Surges, Mortgage Applications Jump
US Retail Sales Rise
Holiday shoppers helped U.S. retail sales increase 0.6% in December from the prior month and beat the year-earlier tally by 5.6%, with restaurants outperforming.
The better-than-expected Commerce Department numbers showed consumer spending reached $709.9 billion, with annual increases led by food and drinking places at 11.3%, health and personal care stores at 8.5% and non-store internet retailers at 8%. With lower prices at the pump, spending at gasoline stations was down 11.5% for the year.
Michael Pearce, lead U.S. economist at Oxford Economics, said the latest retail data showed department stores and online retailers helped to round out a “solid holiday shopping season.” While spending at restaurants and bars was strong in December, he said growth has leveled off in recent months and remains relatively muted when adjusting total sales for inflation.
Pearce noted in a statement that clothing stores were also among those posting strong increases in December as overall sales gains were offset slightly by weakness in housing-related categories such as furniture, electronics and building materials.
National Retail Federation Chief Economist Jack Kleinhenz said consumer spending was “remarkably resilient” throughout 2023. “Although inflation has been the biggest concern for households, the price of goods eased notably and was helped by a healthy labor market, underscoring a successful holiday season for retailers,” Kleinhenz said in a Wednesday statement from the trade group.
Residential Builder Confidence Surges
Builders of single-family homes are feeling better about their business prospects as falling interest rates help to make housing potentially more affordable, according to the latest monthly gauge of industry sentiment by the National Association of Home Builders and Wells Fargo.
The trade group’s January confidence index found 44% of survey respondents generally viewing market conditions as favorable, seven points higher than shown in the December survey. This marked the second consecutive monthly increase in sentiment, tracking closely with a recent decline in interest rates among other factors making developers more optimistic.
“Single-family starts are expected to grow in 2024, adding much needed inventory to the market,” NAHB Chair Alicia Huey said in a statement Wednesday. “However, builders will face growing challenges with building material cost and availability, as well as lot supply.”
NAHB Chief Economist Robert Dietz said mortgage rates on average have decreased more than 110 basis points since late October, helping to lift the sentiment survey’s future sales expectations into positive territory for the first time since August. But rising sales could bring their own set of problems.
“As home building expands in 2024, the market will see growing supply-side challenges in the form of higher prices and/or shortages of lumber, lots and labor,” Dietz said.
Mortgage Applications Jump
Declining interest rates helped mortgage application volume for the week ended Jan. 12 rise 10.4% from the prior week, among the biggest increases posted in several weeks in tracking by the Mortgage Bankers Association.
Adjusting for the New Year’s holiday, the trade group said purchase applications increased 9% from the prior week while still falling 20% below levels for the comparable week of 2023. Refinance applications rose 11% from the previous week and increased 10% from a year earlier.
“Although purchase activity is lagging year-ago levels, refinance applications have improved from their recent low point and have been showing year-over-year gains, albeit at low levels,” MBA Deputy Chief Economist Joel Kan said in a statement Wednesday.
The banker group’s national lender survey showed 30-year, fixed-rate mortgages averaging 6.75%, down from 6.81% in the previous week and the lowest average of the past three weeks. Rates since December have generally remained below 7% after hovering around 20-year highs closer to 8% last fall.
Kan said the trade group is “cautiously optimistic” that declining interest rates will help boost home purchases in coming months by pulling prospective buyers, including apartment renters, off the sidelines.