City Life in Fontana, CA: Your Local Real Estate Advisor

A mixed Employment report was well received by bond investors. Mortgage rates moved to the lowest levels in more than a year.

The Employment report released on Friday showed that the economy added more jobs than expected in December. For 2014, the gains were an impressive 2.9 million, the most since 1999. The Unemployment Rate declined from 5.8% to 5.6%, the lowest level since June 2008. This strength normally would drive mortgage rates higher, but it was more than offset by a big miss in wage growth. While Fed officials would like to see annual wage growth of 3% to 4%, wages were just 1.7% higher than one year ago.

In a major development, the FHA announced it would reduce the annual mortgage insurance premium it charges on new FHA loans from 1.35% to 0.85%. This change, to be implemented near the end of January, in effect will lower mortgage payments on FHA loans the same as a 0.50% reduction in rates. Lower rates have made home ownership more affordable, and this change reduces the cost of ownership even more. The reduction will benefit many people, particularly first-time home buyers, due to the low down payments and relaxed credit standards associated with FHA loans.

The next piece of labor market data will be the JOLTS report on January 13. This report measures the level of job openings and labor turnover rates, and it is closely watched by Fed Chair Yellen. On January 14, Retail Sales, which account for roughly 70% of US economic activity, will be released. In addition, there will be Treasury auctions on Monday, Tuesday, and Wednesday.