The Obama administration released their ideas on how to overhaul Fannie Mae, Freddie Mac and the Federal Housing Administration.  Currently, all three issue mortgage backed securities that are backed or guaranteed by you the tax payer.  This gives these securities very low risk and has great appeal to foreign investors that seek low risk.  This is why your mortgage rates are still historically very low.

However, the proposed changes will enable the government to ease away from being such a big player in the mortgage business, moving from 95% of the total market down to as low as only 40% of the total market.  By doing so, rates will naturally adjust upward to equalize with the new risk levels.  These proposed changes will take a long time to pass and to be put into effect, so take advantage of today’s low rates and loan programs now while housing prices are still very affordable.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -42 basis points last week which caused 30 year fixed rates to move higher and closed at their highest levels of 2011. As we have discussed several times, mortgage rates are pushed lower when the economy is performing poorly and their is little to no risk of inflation. So, as the economy continues its upward march out of the recession, mortgage rates are pushed upward on the stronger growth and inflationary concerns. We had a couple of strong economic reports last week. The weekly Initial Jobless Claims were much lower than expected and Wholesale Inventories saw stronger gains. Both were positives for the economy and therefore negative for mortgage rates.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week.  They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.  I will be watching these reports closely for you and let you know if there are any big surprises:

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Date	ET	Release	For
15-Feb	8:30	Retail Sales	Jan
15-Feb	8:30	Retail Sales ex-auto	Jan
15-Feb	8:30	Empire Manufacturing	Feb
15-Feb	8:30	Export Prices ex-ag.	Jan
15-Feb	8:30	Import Prices ex-oil	Jan
15-Feb	9:00	Net Long-Term TIC Flows	Dec
15-Feb	10:00	Business Inventories	Dec
15-Feb	10:00	NAHB Housing Market Index	Feb
16-Feb	7:00	MBA Mortgage Purchase Index	11-Feb
16-Feb	8:30	Housing Starts	Jan
16-Feb	8:30	Building Permits	Jan
16-Feb	8:30	PPI	Jan
16-Feb	8:30	Core PPI	Jan
16-Feb	9:15	Industrial Production	Jan
16-Feb	9:15	Capacity Utilization	Jan
16-Feb	10:30	Crude Inventories	12-Feb
16-Feb	14:00	Fed Minutes
17-Feb	8:30	CPI	Jan
17-Feb	8:30	Core CPI	Jan
17-Feb	8:30	Initial Claims	12-Feb
17-Feb	8:30	Continuing Claims	5-Feb
17-Feb	10:00	Leading Indicators	Jan
17-Feb	10:00	Philadelphia Fed	Feb

Despite bad weather, U.S. home sales jumped more than expected in December.  Sales of previously occupied homes soared 12.3 percent last month which far surpassed national forecasts of an increase of only 4.5%.  This marks the second straight month of significant gains in sales.  In November, Existing Home Sales surged 6.1%.  The national median home price in December was $169,300 which was only 0.2% lower than levels a year ago.  This is important to note because 36% of homes sold in December where under the “distressed” category.  And even though this is a larger than normal percentage of sales, the national median home price barely moved.  In fact, it actually increased in some ares such as the Midwest (+3.3%).

In other news, Housing Starts decreased from 553K to 529K.  While the media has had a field day of reporting this as bad news…it is actually good news!  The number one reason that the housing industry fell was over supply.  And with supply levels still above where they need to be, any addition to those levels (for example by building even more homes) is not a good idea.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -54BPS from Tuesday’s open (Monday was closed due to the holiday) to Friday’s close which caused 30 year fixed rates to move higher.  MBS generally trade in the opposite direction of positive economic news.  And last week we had a lot of positive economic news with strong results from Existing Home Sales, Initial Jobless Claims, Leading Economic Indicators and more.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week.  They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.  I will be watching these reports closely for you and let you know if there are any big surprises:

Date	ET	Release	For
25-Jan	9:00	Case-Shiller 20-city Index	Nov
25-Jan	10:00	Consumer Confidence	Jan
25-Jan	10:00	FHFA Housing Price Index	Nov
26-Jan	7:00	MBA Mortgage Purchase Index	21-Jan
26-Jan	10:00	New Home Sales	Dec
26-Jan	10:30	Crude Inventories	22-Jan
26-Jan	14:15	FOMC Rate Decision	Jan
27-Jan	8:30	Initial Claims	22-Jan
27-Jan	8:30	Continuing Claims	22-Jan
27-Jan	8:30	Durable Orders	Dec
27-Jan	8:30	Durable Orders ex Transportation	Dec
27-Jan	10:00	Pending Home Sales	Nov
28-Jan	8:30	GDP-Adv.	Q4
28-Jan	8:30	Chain Deflator-Adv.	Q4
28-Jan	8:30	Employment Cost Index	Q4
28-Jan	9:55	Michigan Sentiment – Final	Jan

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Demand for housing is fueled by consumer confidence levels.  And nothing impacts those levels more than how consumers feel about the job market.  We had three major releases last week that gave us a better understanding of the employment picture.

First up were the Challenger Job Cuts report.  This measures the number of layoffs announced by corporations.  They reported that layoffs decreased by 34% in December.  Next up was the ADP Private Payroll report.  They measure non-farm and non-government hiring.  This report showed a gain of 297,000 jobs in December which was one of the strongest increases on record.  Lastly, the Labor Department reported that the national Unemployment Rate declined from 9.8% to 9.4% which is the lowest reading in 1 1/2 years.

While we certainly still have a lot of ground to make up in the job market, the above news is good for housing and certainly mirrors last month’s gains in both Existing Home Sales and Pending Home Sales.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) moved sideways last week but we certainly did see some big swings in mortgage rates during the middle of the week.  The very strong ADP Private Payroll data pushed mortgage rates upward on Wednesday but rates moved backed down after Friday’s Unemployment report.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week.  They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.  I will be watching these reports closely for you and let you know if there are any big surprises:

Date	ET	Release	For
11-Jan	10:00	Wholesale Inventories	Nov
12-Jan	7:00	MBA Mortgage Purchase Index	7-Jan
12-Jan	8:30	Export Prices ex-ag.	Dec
12-Jan	8:30	Import Prices ex-oil	Dec
12-Jan	10:30	Crude Inventories	8-Jan
12-Jan	14:00	Treasury Budget	Dec
12-Jan	14:00	Fed’s Beige Book	Jan
13-Jan	8:30	Initial Claims	8-Jan
13-Jan	8:30	Continuing Claims	1-Jan
13-Jan	8:30	PPI	Dec
13-Jan	8:30	Core PPI	Dec
13-Jan	8:30	Trade Balance	Nov
14-Jan	8:30	CPI	Dec
14-Jan	8:30	Core CPI	Dec
14-Jan	8:30	Retail Sales	Dec
14-Jan	8:30	Retail Sales ex-auto	Dec
14-Jan	9:15	Industrial Production	Dec
14-Jan	9:15	Capacity Utilization	Dec
14-Jan	9:55	Mich Sentiment	Jan
14-Jan	10:00	Business Inventories	Nov

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Contracts for pending sales of previously owned U.S. homes rose much faster than expected in November.  This follows last week’s surprise gain in existing home sales.  A pending home sale is when a contract has been signed between a buyer and a seller but the home has not yet closed.

The National Association of Realtors reported a rise of 3.5% in November, economists had expected an increase of only 2%.  Once again, we are seeing a little stronger than expected demand which has been following a very clear pattern of strength over the past four months.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +86 basis points from Monday’s open to Friday’s close causing 30 year fixed rates to decrease from the previous week. We had several very strong economic reports such as Initial Jobless claims and Chicago PMI. Normally, the strength in these economic reports would have pressured mortgage rates higher. But traders parked their funds into the safe and boring world of mortgage backed securities before the end of the year which helped mortgage rates temporarily.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week.  They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.  I will be watching these reports closely for you and let you know if there are any big surprises:

Date	ET	Release	For
3-Jan	10:00	Construction Spending	Nov
3-Jan	10:00	ISM Index	Dec
4-Jan	10:00	Factory Orders	Nov
4-Jan	14:00	FOMC Minutes
4-Jan	15:00	Auto Sales	Jan
4-Jan	15:00	Truck Sales	Jan
5-Jan	7:00	MBA Mortgage Purchase Index	31-Dec
5-Jan	7:30	Challenger Job Cuts	Dec
5-Jan	8:15	ADP Employment Change	Dec
5-Jan	10:00	ISM Services	Dec
5-Jan	10:30	Crude Inventories	1-Jan
6-Jan	8:30	Initial Claims	1-Jan
6-Jan	8:30	Continuing Claims	25-Dec
7-Jan	8:30	Nonfarm Payrolls	Dec
7-Jan	8:30	Nonfarm Private Payrolls	Dec
7-Jan	8:30	Unemployment Rate	Dec
7-Jan	8:30	Hourly Earnings	Dec
7-Jan	8:30	Average Workweek	Dec
7-Jan	15:00	Consumer Credit	Nov

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.