Home sales rose in December to the highest pace in nearly a year. The gain coincides with other signs that show the troubled housing market improved at the end of last year.

The National Association of Realtors said Friday that sales increased 5 percent last month to a seasonally adjusted annual rate of 4.61 million, the best level since January 2011 and the third straight monthly increase.

Sales are increasing at a time when the market is flashing other positive signs. Mortgage rates are at record-low levels. Homebuilders have grown slightly less pessimistic because more people are saying they might be open to buying a home this year. And home construction picked up in the final quarter of last year.

The median sales price rose 2.3 percent to $164,500 in December.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -91 basis points from last Friday to the prior Friday which moved mortgage rates upward.
The biggest economic surprise was the large decrease in the weekly Initial Jobless Claims data which is certainly positive for the economy, but negative for bonds.
But the real catalyst was a change in market sentiment that Greece’s bond holders were close to accepting the new terms of a “voluntary” hair cut of 60% to 70% on what they are owed. This removed some of the “fear factor” premium in bonds that have kept mortgage rates artificically low for the past 8 weeks. .

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.

The number of U.S. homes that received a foreclosure filing fell to a four-year low in 2011 as a slowdown in processing hit the market, RealtyTrac said in a report on Thursday.

Foreclosure filings, which include default notices, scheduled auctions and bank repossessions, slid by 34 percent in 2011, the lowest level since 2007, just as the housing market was starting to crumble. RealtyTrac said there were filings on 1,887,777 homes last year.

Bank seizures of homes fell to 804,423 from 1,050,500 in 2010, also marking the lowest level in four years.

“A big part that is inflating the size of the decrease is a continuing extended foreclosure process,” said Daren Blomquist, director of marketing communications at RealtyTrac.

Nevada ranked as the state with highest foreclosure rate for the fifth year in a row, with one in 16 Nevada homes receiving at least one foreclosure filing in 2011. Even so, Nevada saw a 31 percent decrease in foreclosure activity for the year.

The length of time for foreclosure processing continued to increase in the final quarter of the year. Homes took on average 348 days to move through the process, up from 336 days in the third quarter and 305 days in the fourth quarter of 2010.

Foreclosures took the longest in New York state, where homes foreclosed in the fourth quarter took an average 1,019 days to complete the process. RealtyTrac also released foreclosure activity for December, which fell to a 49-month low of 205,024 homes, down nearly 9 percent from November. But bank repossessions rose 10 percent to 61,774.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +14 basis points from last Friday to the prior Friday which moved mortgage rates slightly lower.
We had a mixed bag of economic data with very strong readings in Consumer Sentiment but we had weaker than expected Retail Sales data.
Demand for our 10 year Treasury auction was very strong but pulled back on the 30 year Treasury bond auction.
With the long weekend, traders moved their money into bonds on Friday which helped to push mortgage rates lower.

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.

Real Estate used to be about location, location, location.  Now it is most certainly about jobs, jobs, jobs.

We received some welcome news on the jobs front last week:

The private sector added a seasonally adjusted 325,000 jobs during the month, up from 204,000 in November, payroll-processing firm ADP said:

It marked the biggest monthly gain since December 2010, and was stronger than expected. Economists surveyed by Briefing.com were forecasting a gain of 180,000 jobs for the month.  And the great news is that half of the gains were made by small business (companies with fewer than 50 employees).

Headline National Unemployment Rate Drops to 8.5%:

The U.S. Unemployment Rate unexpectedly fell to 8.5 percent last month as job creation was more robust than expected, providing continued signs that the nation’s labor market is improving gradually.

Growth in manufacturing jobs helped offset a loss in government positions, while wages edged higher and the length of the work week also lengthened a bit. Job gains came from a variety of quarters: Transportation and warehousing surged by 50,000, the couriers and message industry rose 42,000, and retail added 28,000. Manufacturing grew by 23,000 and the hospitality industry continued its brisk pace, adding 24,000 jobs in December and 230,000 over the past year at food and drinking establishments.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -82 basis points from last Friday to the prior Mortgage backed securities (MBS) gained +95 basis points from last Friday to the prior Friday which moved mortgage rates lower.
We had much better than expected U.S. economic data. Pending Home Sales, Consumer Confidence, and the Chicago PMI were all very strong.
Normally, these type of strong readings would cause bonds to sell off and your mortgage rates to rise. But last week was a holiday shortened week that saw very low volumes.
Traders simply “parked” their funds into the safe-haven of bonds over the holiday week which increased demand for bonds and temporarily lowered 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.

The number of Americans who signed contracts to buy homes in November rose to the highest level in a year and a half. The best reading on pending homes sales since a federal home-buying tax credit expired appeared to encourage traders on Wall Street.

The Realtors group said Thursday that its index of sales agreements jumped 7.3 percent last month to a reading of 100.1. A reading of 100 is considered healthy. The last time the index was that high was in April 2010, one month before the tax credit expired.

Contract signings usually indicate where the housing market is headed. There’s a one- to two-month lag between a signed contract and a completed deal.

Homes are the most affordable they’ve been in decades. Long-term mortgage rates are at historic lows and prices in most metro areas have tumbled since late 2006.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -82 basis points from last Friday to the prior Mortgage backed securities (MBS) gained +95 basis points from last Friday to the prior Friday which moved mortgage rates lower.
We had much better than expected U.S. economic data. Pending Home Sales, Consumer Confidence, and the Chicago PMI were all very strong.
Normally, these type of strong readings would cause bonds to sell off and your mortgage rates to rise. But last week was a holiday shortened week that saw very low volumes.
Traders simply “parked” their funds into the safe-haven of bonds over the holiday week which increased demand for bonds and temporarily lowered 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.

Investors cheered yet another U.S. report showing signs of improvement in the housing market.

The Commerce Department report showed US new home sales rose for the third straight month in row, increased by 1.6% to a seasonally adjusted annual rate of 315,000 from October.

Even as the pace of gain was smaller than 2.6% forecast by economists, investors took comfort in that housing data released in recent days have started to show stabilization, and given that the housing market is one of a major contributors to the economy, it could provide some support for the economic growth next year.

New homes account for just a fraction of the housing market, but they have a big impact on the economy. Each new home built creates roughly three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -82 basis points from last Friday to the prior Friday which moved mortgage rates higher.
We had a mixed bag of U.S. economic data.  The 3rd quarter GDP number was revised downward from 2.0% to 1.8% but Durable Goods Orders, Initial Jobless Claims and New Home Sales were much better than expected.
We saw strong demand for the U.S. 2 and 5 year Treasury auctions but demand for the 7 year Treasury auction fell sharply which was a negative for mortgage rates.
Traders sold off MBS on the positive economic news and the relatively weak 7 year Treasury auction which pushed mortgage rates higher.

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.

Government reports on weekly jobless claims, manufacturing activity and inflation offered fresh evidence the U.S. economic recovery is picking up steam.

New U.S. claims for unemployment benefits dropped to a 3 1/2 year low last week, a government report showed on Thursday, suggesting the labor market recovery was gaining speed. Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 366,000, the Labor Department said. That was the lowest level since May 2008.

A gauge of manufacturing in New York State showed growth accelerated in December to its highest level since May as new orders improved, the New York Federal Reserve said in a report on Thursday. The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions. The gain in December added on to improvement last month that pulled the index out of a five-month contraction.

Wholesale prices rose a modest 0.3 percent last month, as companies paid more for such items as food and pharmaceuticals. But energy prices barely rose, keeping inflation in check.

Most economists say they think inflation has peaked and will slowly decline next year. That’s because prices for oil and many agricultural commodities have fallen from their highs this spring. Slower growth in China and a possible recession in Europe have reduced global demand for energy and other goods.

Lower price growth means consumers will have more buying power, potentially boosting consumer spending. The jump in gas and food prices earlier this year limited the ability of consumers to buy other goods, thereby slowing the economy.

Consumer spending rebounded in the July-September quarter as prices eased. The stronger spending helped increase growth to an annual rate of 2 percent from a slight 0.9 percent in the first half of the year. Economists expect consumer spending to rise again in the last three months of this year and think growth could top 3 percent. Federal Reserve policymakers, like many private economists, predict inflation will fall next year. That would give the central bank more latitude to hold down interest rates and potentially take other steps to stimulate the economy.

Tame inflation, improved manufacturing, increased consumer demand and super-low mortgage rates all add up to big positives for the housing market.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +67 basis points from last Friday to the prior Friday which moved mortgage rates lower. Once again, the U.S. saw much better than expected economic data.
Both the N.Y. Empire and Philly Fed manufacturing data saw big increases and the Initial Weekly Jobless Claims fell below 390K. We also saw very tame results in both the Consumer Price Index and the Producer Price Index which point to reduced inflationary pressure.
MBS rallied in the later part of the week on the heels of to very successful U.S. Treasury auctions. Both the 10 and 30 year auctions saw very strong demand which pushed rates lower.
This was due to a growing concern that the recent agreement out of the European Summit would not be enough to stem the tide in Europe. This concern caused investors to snap our bonds even though the interest rates and returns are very low. Foreign investors simply want a place to put their funds, knowing that they will get those funds back.

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.

In some metropolitan areas, the market has bottomed, with both sales and prices on the rise and foreclosures on the decline.

This contrarian — and largely overlooked — thesis flies in the face of the persistent gloom that has nagged the industry since 2007, when the subprime crisis flared.

Industry analysts and players cite a number of reasons — some traditional (employment), others unique to the post-credit bubble era (foreclosures)  — for the long-awaited sea change. An analysis of industry and government data also support the forecast.

“It has become increasingly apparent to us that the pieces for a housing rebound next year are beginning to fall into place,” declared Barclays Capital analyst Stephen Kim in a recent note to investors.

Proponents admit that the nascent rebound could easily be derailed, but stress that after years of government efforts to support sales and prices as well as the volatile impact of foreclosures, the market has regained a measure of normalcy.

“With the exception of really hard-hit markets, the vast majority is ready to turn around,” adds Jerry Howard, president and CEO of the National Association of Home Builders, NAHB. “The Washington, D.C., area is not only ripe for recovery, they need to start building units.”

There’s been little conventional, however, about this housing slump, which is one reason it’s had so many false bottoms. Among its many firsts — housing starts fell through 1 million annual units, foreclosures topped 2 million in three consecutive years, and home prices declined on a national basis.

The catalysts to recovery are mostly the same: for potential buyers, residential rents have now risen enough to consider buying; existing-home inventory is the lowest in five years, while that of new homes is at a 40-year low; affordability is at a record high; delinquencies have peaked; consumer confidence is on the rise ; and job growth is accelerating.

For investors, with a continuation of the gold rally in question, real estate is beginning to look like a viable inflation hedge alternative, while rising rents mean greater profits.

Finally, there’s the intangible fatigue with bad news, and a desire to end the negative feedback loop.

“We believe there is sizable housing demand that could be released into the market,” says Lawrence Yun, chief economist of the National Association of Realtors, NAR.

The NAR is forecasting existing home sales will rise 5 percent in both 2012 and 2013; prices will edge up 2 percent in each of those two years, then 4 percent in 2014.

The NAHB is forecasting a 5.1-percent increase in new home sales and a 10-percent increase for new home starts in 2012.

Jobs, Jobs, Jobs

A turnaround in the housing market will require continued improvement in the job market.

The economy has created jobs 13 months in a row for a total of almost 1.9 million. Weekly jobless claims have been routinely below the key level of 400,000, and the national jobless rate is down to 8.6 percent.

There are already signs in some markets that an improving employment picture is boosting housing demand and sale prices.

In cities such as Tampa, Fla., South Bend, Ind., Grand Rapids, Mich., Raleigh, N.C., Wichita, Kan., and Green Bay, Wis.., the median sales price of an existing single family home increased 1-2 percent in the third quarter, during which time the jobless rate and/or payrolls growth improved dramatically.

Even in the Cape Coral-Fort Myers, Fla. metropolitan area — considered the epicenter of the foreclosure crisis a few years ago — prices were just 1.4 percent lower in the third quarter than the previous year.

A new index by the NAHB and First American, the Improving Markets Index, IMI, launched in September, tracks housing markets throughout the country that are showing signs of improving economic health. Thirty cities – including San Jose, Pittsburgh, New Orleans and Winston-Salem, N.C. – are showing growth in permits, sales and employment.

In San Diego — where in the last year the jobless rate has fallen from 10.4 percent to 9.7 percent and 24,000 jobs have been added — home inventory is down to two months; in some areas of San Francisco (9.4 vs. 10.3 percent), it is one month.

More broadly, 40 percent of all states showed existing home sale increases on both a quarterly and annual basis in the third quarter, according to National Association of Realtors data. That includes high foreclosure-rate states, such as California, Georgia, Michigan and Utah. All but six states showed double-digit gains year over year.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -20 basis points from last Friday to the prior Friday which moved mortgage rates higher. MBS traded in a very tight range for the week. We received much better than expected economic data which normally pressures mortgage rates. ISM Services, Initial Jobless Claims, Wholesale Inventories and Consumer Sentiment all came in stronger than market expectations.
MBS sold off on Friday (causing rates to increase) after the European Union Summit released details of their new agreement with Eurozone countries. This removed some of the “flight to safety” premium that has kept mortgage rates low.

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.

Potential home buyers came out of the woodwork in October, signing contracts to buy existing homes at a higher-than expected pace.

Pending home sales jumped 10.4 percent compared to September, according to the National Association of Realtors, with the biggest gains in the Midwest, up 24 percent. The Northeast also saw sizeable gains, as did the South. Only out West did buyers stay on the sidelines, with pending home sales there basically flat month to month.

“Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows, and there is a pent-up demand from buyers who normally would have entered the market in recent years,” said Realtor chief economist Lawrence Yun. “We hope this is indicates more buyers are taking advantage of the excellent affordability conditions.”

This data continues the string of positive housing data with New Home Sales up 1.3% on a monthly basis and Existing Home Sales up 13.5% on a yearly basis.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +58 basis points from last Friday to the prior Friday which moved mortgage rates lower. MBS traded in a very tight range for the week. We received much better than expected economic data which normally pressures mortgage rates. Pending Home Sales, Manufacturing, Vehicle Sales, and Unemployment data all surpassed the market expectations and put to bed the concept of a “double-dip” recession for the United States. MBS made all of their weekly gains on Friday afternoon. This gave consumers the best mortgage rates of the week. This was the result of continued concern over the European debt crisis and traders seeking to park their money in the safety of U.S. bonds over the weekend.

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.

New single-family home sales rose in October and the supply of homes on the market fell to its lowest level since April of last year, showing some healing in the housing sector.

The Commerce Department reported on Monday that sales edged up 1.3 percent to a seasonally adjusted 307,000-unit annual rate, which was the fastest pace in five months.

The supply of new homes in the market would last 6.3 months at the current pace of sales.

This report follows the trend set by last week’s gain of 1.3% for Existing Home Sales.  Both market segments continue to perform better than analysts’ expectations and show some much needed strength in the housing market.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost only -4 basis points from last Friday to the prior Friday which moved mortgage rates sideways.
This was the second straight week where mortgage rates remained in a very narrow range.
We had very successful 2, 5 and 7 year Treasury auctions as foreign investors snapped up our debt.
The U.S economy continued to receive positive economic news as Initial Jobless Claims came in below 400K for the third week in a row and Consumer Sentiment had its highest reading in the last several months.

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.