Corporate America still loves stock buybacks. Warren Buffett spent a significant chunk of his annual letter, published Saturday, praising them — which is just as well, given that 2023 is likely to be the first year where they reach $1 trillion, Axios' Felix Salmon writes.

Why it matters: Buybacks, which were illegal until 1982, are now taxed at 1%. The change enacted two months ago is estimated to raise $74 billion over a decade for the public fisc. So far, the tax doesn't seem to have reduced their popularity in the slightest.

The big picture: As Buffett explains, the theory behind buybacks is that they reduce the number of shares outstanding, thereby giving each remaining shareholder ownership of a greater percentage of the company.

• The catch: Buybacks cost money — sometimes too much money.
• Even Buffett doesn't like all buybacks. In something of a tautology, he says he only likes the ones made "at value-accretive prices" — which is to say, he thinks buybacks create shareholder value only when they create shareholder value. Thanks, Warren.

Where it stands: Shareholders expect to receive corporate profits one way or another — which is to say, either through buybacks or via dividends.

• Investors who pay taxes generally prefer buybacks, because dividends are taxable as income. Buybacks, on the other hand, generate no tax bill for any non-selling shareholder — and even selling shareholders generally only pay the lower long-term capital gains tax.

Executives also have good reasons for preferring buybacks to dividends.

• For one, when employees are granted options, buybacks effectively increase the proportion of the company that they're entitled to purchase at a fixed price, making the options more valuable. Dividends, by contrast, just reduce the amount of money in the company, making options less valuable.

Driving the news: Goldman Sachs announced Friday that it has spent $2.25 billion buying back its own shares so far this year and that it was authorized to spend another $30 billion in the future.

• Even bigger buyback announcements have come from Meta ($40 billion) and Chevron ($75 billion).

Between the lines: Buybacks are a weak signal that executives think the stock is undervalued. Dividends send a different, but equally positive, message: That the company is confident of being consistently profitable far into the future.

The bottom line: Buybacks are a form of financial engineering; often they're paid for not out of profits but from borrowing money in the debt markets. Taxing them just makes the financial engineering a tiny bit more complicated, without making any major changes to the way that companies try to make their shareholders richer.

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It's a tale of two housing markets. New home sales rose more than expected in January, climbing 7.2% from the month before, per government data out Friday, Emily writes.

• Meanwhile: In the much bigger existing home market, sales fell for the 12th straight month in January, decreasing 0.7% to 4 million from the month before, according to the National Association of Realtors, also out last week.

Why it matters: High rates are crushing housing sales, generally, but deals for new homes are doing a bit better, thanks to price cuts and the raft of incentives on offer by homebuilders, writes Sam Hall, a property economist at Capital Economics, in a note.

• Builders have had big success with mortgage buydowns, offering rates as low as 4.5% to buyers, as Axios' James Briggs reported last week.
• The median sale price for a new home declined to $427,500 in January, from $465,600 in December.

😰 But, but, but: Overall, sales are still way below their frothy peaks. New home data can also be volatile and is subject to revisions.

• Oh, and also, mortgage rates are going back up — the average hit 6.5% last week — and that could weigh heavily on the whole scene.

Here’s a hint about why inflation remained stubbornly high in January: Americans’ spending accelerated, after a few months of trending down, Axios’ Kate Marino writes.

Driving the news: Personal consumption expenditures data, out Friday, shows that even after adjusting for inflation, spending rose 1.1% in January from the month before.

• That’s the biggest monthly percentage increase since March 2021 — during peak reopening fervor.

Why it matters: The Fed’s been hard at work trying to quell demand in its battle against inflation. But these figures imply that consumers, on the whole, aren’t exactly getting the message.

• The impact: The growing prospect that the Fed may have to raise rates more aggressively than investors had hoped just a few months ago propelled Treasury yields higher on Friday, while the S&P 500 shed over 1%.

Go deeper: Painless disinflation is looking less likely