Economic Update for the week ending January 29, 2022

Stock markets ended the week higher after three straight weeks of losses – The fourth-quarter GDP figure was announced Thursday. The Gross Domestic Product (GDP) is the broadest measurement of the health of the economy. It represents the value of all goods and services produced within the U.S. The fourth-quarter GDP increased 6.9% year-over-year. That was a welcome rebound from a disappointing 2.3% growth figure in the third quarter. For the entire year of 2021, the annualized GDP was up 5.7%, the highest increase since 1984. Reporting of fourth-quarter corporate earnings has begun. Corporate profits are coming in higher than expected. While bond and mortgage rates have risen sharply, investors feel that they are beginning to level out and the expected future increases by the Fed are already built into the current rates. The Dow Jones Industrial Average closed the week at 34,725.47, up 1.3% from 34,265.37 last week. It is down 4.4% year to date. The S&P 500 closed the week at 4,431.35, up .08% from 4,397.94 last week. The S&P is down 7.1% year to date. The NASDAQ closed the week at 14,454.61, up 5% from 13,758.92 last week. It is down 7.6% year to date. 

U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 1.78%, almost unchanged from 1.75% last week. The 30-year treasury bond yield ended the week at 2.07%, unchanged from 2.07% last week. We watch bond yields because mortgage rates often follow treasury bond yields. 

Mortgage rates – The January 27, 2022 Freddie Mac Primary Mortgage Survey reported mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate was 3.55%, unchanged from 3.56% last week. The 15-year fixed was 2.80%, unchanged from 2.79% last week. The 5-year ARM was 2.70%, also unchanged from 2.69% last week. 

U.S. Home Sales – The National Association of Realtors reported that existing-home sales totaled 6.21 million in 2021, up 8.3%from the number of homes sold in 2020. That represented the most homes sold in a year since 2006. The median price of a home ended the year 15.8% higher than at the end of 2020. December marked a record 118-straight months of year-over-year increases in the median price paid for a home in the United States. Inventory levels also hit a record low. Inventory levels ended 2021 with 14.2% fewer homes for sale than the number of homes for sale at the end of 2020. There was just a 1.8 month supply of homes for sale on December 31, 2021, an all-time low.