The minutes of January’s Federal Reserve Open Markets Committee (FOMC) meeting noted volatility in domestic markets which some reports attributed to a perceived inflexibility in the FOMC’s rate increases and balance sheet normalization. This was one of the factors that contributed to the FOMC adopting a “patient” policy toward future actions, in which they stressed the need to examine the effect of previous rate hikes on the economy in addition to the state of domestic and global economic conditions. Almost all meeting participants also felt that it would be “ desirable to announce before too long a plan to stop reducing the Federal Reserve’s asset holdings later this year“, which would likely leave reserves at a higher than necessary level that would then be very gradually declined to a more appropriate level.

For the second consecutive month overall new Durable Goods orders increased, with December up $3.0 billion (+1.2%) after November’s +1.0% increase. The increase for December was primarily due to a +2.8 billion (+3.3%) increase in transportation equipment orders, which was itself due to increases in civilian aircraft orders (+28.4%, +$2.8 billion) and motor vehicle orders (+2.1%, +$1.3 billion), that were offset by a drop for defense aircraft (‑30.5%, -$2.04 billion) orders. Orders for core capital goods, excluding both transportation and defense, fell -0.7% (-$462 million) in December after a -1.0% (-$903 million) drop in November. On a yearly basis, overall orders were up +8.1%, transportation orders were up 10%, and core capital goods orders were up +6.1%.

Existing home sales fell -1.2% in January to a seasonally adjusted annual rate of 4.94 million, which was the lowest rate since November 2015 and a decrease of -8.5% over the year. Yearly growth in median home prices was the slowest since February 2012, but did continue to be positive for its 83rd consecutive month of yearly gains, rising +2.8% to $247,500. Inventory increased from 3.4 months in January 2018 to 3.9 months in January 2019, but still remained low, with inventory shortages worse in the lower priced end of the market. Most sales were in the $100-250k range (40% of all sales, down -9.7% Y/Y), followed by the $250-500k range (34% of all sales, down -3.2% Y/Y).