Government

First time claims for unemployment insurance dropped 12,000 to 350,000 for the week ended December 22, the third lowest level of the year, the Labor Department reported Thursday. Economists expected claims to increase to 365,000. The previous week’s report was revised upward to 362,000 from the originally reported 361,000.

Home prices fell in October for the first time since March, according to the monthly Case-Shiller Home Price Index. Both the 10-city index and the 20-city index decreased 0.1 percent from September to 158.77 and 146.08 respectively. The value of the 10 city index fell 0.10 and of the 20-city index dropped 0.09. The 10-city index for October was 3.4 percent higher than it was in October 2011 and the 20-city index showed a 4.3 percent year-year gain.

Economic indicators are never clear and are not isolated bits of data. The numbers released in the last week provided another example of that maxim.

As Washington engages in a standoff over budgetary proposals to avert the fiscal cliff, several industry professionals and associations are calling upon lawmakers to avoid slaughtering what was once thought to be a sacred cow: the mortgage interest tax deduction (MID). While many housing professionals view the deduction as a break for homeowners and an incentive for others to purchase their own homes, critics call the MID a ""subsidization of the real estate industry."" Now that the MID is on the bargaining table, a number of people are speaking up in defense of it.

Tailwinds should continue for specialty servicers in 2013, according to a report from FBR. As large, traditional servicers become unwilling to service certain asset that require more attention, FBR says it believes about $600 billion to $700 billion in ""high-touch, credit sensitive assets"" will eventually make their way into the specialty servicing and sub-servicing sectors.

Keefe, Bruyette & Woods (KBW) a boutique investment bank and broker-dealer, recently released its predictions for the mortgage market for the year 2013, entitled Watching Grass Grow: Mortgage Reform in 2013. As the title implies, KBW does not expect major changes in the New Year. However the investment bank does expect some ""modest changes in the mortgage landscape driven by the Federal Housing Finance Agency (FHFA).""

No matter how foggy the haze is, economists typically dust off their crystal balls in December. However economic forecasts too often involve driving by looking in a rear-view mirror. Anticipating what might happen in the housing markets, with so many moving parts involved, can be the trickiest of all forecasts. Because housing is a unique expenditure--combining elements of investment and a service--it depends on a variety of elements: employment, income, interest rates, the regulatory environment, and even the weather.

In the third quarter of this year, the overall percentage of mortgages that managed to stay current improved from last year, but declined slightly quarter-over-quarter, according to a report from the Office of the Comptroller of the Currency (OCC). The report also found foreclosure activity ""remains elevated,"" but fewer properties entered the foreclosure process. In Q3, more home retention actions were also applied compared with home forfeiture actions (foreclosure sales, short sales, and deeds-in-lieu).

Personal income jumped 0.6 percent in November--twice what economists forecast--improving $85.8 billion, while spending rose a hefty 0.4 percent, the Bureau of Economic Analysis. The growth in spending matched economists’ forecasts.

Fannie Mae and Freddie Mac may have lost billions of dollars as a result of borrowing rate manipulation, according to a report from the Office of the Inspector General of the Federal Housing Finance Agency (FHFA-OIG). The banking world was rocked in late June as it was revealed that traders at Barclays spent years rigging the London Interbank Offered Rate (Libor), a global interest rate at which banks lend money to each other. As those probes continue, the Wall Street Journal is now reporting Fannie Mae and Freddie Mac may have sustained more than $3 billion in losses from the rate-rigging.