Fixed Mortgage Higher, ARMs Lower

Sales of U.S. existing homes fell 0.8% in December to a seasonally adjusted annual rate of 6.22 million mainly due to decline in the West, according to a report from National Association of Realtors. Seasonally adjusted sales have been essentially flat for 5 months after a steep decline in summer. Sales in December were down 7.9% compared with December 2005. For all of 2006, existing-home sales fell 8.4% to 6.48 million, the largest annual decline in 17 years. Inventories of unsold homes fell 7.9% in December to 3.51 million, representing a 6.8-month supply -- which is a rather good news for housing market. The average median sales price was $222,000 in December, unchanged from December 2005. Read the full report.

Overall, the report shows indications of improvement or at least stabilization in recent months. It seems probably we are very near the bottom of housing market and since stocks start moving up before a real bottom is reached, we feel it's worthwhile keeping a watch on Homebuilders' ETFs to find an opportunity of getting in.

Overall, various leading indicators of future economic activity from December signaled steady growth in the coming months. As a result, Fixed mortgage rates remained almost unchanged this week, while adjustable-rate mortgage rates moved lower.

According to Freddie Mac's weekly survey, the 30-year fixed-rate mortgage rose slightly to 6.25% from 6.23% average last week. The rate was 6.12% one year back. The 15-year fixed rate averaged at 5.98% this week -- unchanged from last week. At this time last year this rate was 5.70%.

On the other hand, Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.0o%, down from 6.04% average last week. The hybrid averaged 5.75% a year ago. One-year Treasury-indexed ARMs averaged 5.49%, down from 5.51% of last week. This rate averaged 5.20% a year ago.