Market Update

The Fed didn’t raise policy rates at this week’s FOMC meeting, though their announcement pointed
to a likely increase when they meet in March. Consumer spending increased in December, a
reflection of the strong labor market. However, the 2.4% national savings rate was the lowest since
2005. The Fed believes that inflation could reach their 2% target this year. Supported by a growing
economy, inflation pushes rates (including mortgage rates) higher.

National home prices continued their run higher in November, rising 6.2% annually. Home prices
are rising more than three times faster than the rate of inflation. Despite tight inventory, pending
home sales were up 0.5% in December over November. The supply of homes for sale is at its
lowest level since 1999. Construction spending increased more than expected in December.
Private residential projects rose to their highest level since March 2007.