The last of the housing market data is being tallied from 2009, and it looks like things have ended on something of a weak note. Housing starts dropped 4% in December. Multi-family housing starts gained, but that small victory was completely overwhelmed by the fact that single-family housing starts were down so much.

In my mind, it appears that the news illustrates continued stress on families. Demand for multi-family units indicates that there are plenty of families in financial trouble, and even suffering through foreclosure, looking for less expensive housing. Single-family housing starts are above the bottom seen in 2009, but they are far from showing strength. Improvement in this area is likely to be slow, depending on a change in the employment situation.

Until families can afford single housing units gain, housing starts are likely to continue to struggle.

Even as we hear about a recovering economy, the fact of the matter is that there are some places that have higher rates of foreclosure than others. Here is a chart on foreclosure distribution from 2005 to 2009 found at The Mortgage Reports.

You can see the large spike after the financial crisis toward the end of 2008. And it does appear that foreclosures are declining right now. As long as we see something of an improvement in terms of employment and the overall economy, there should be continued declines in the rate of foreclosure.

After taking a bit of a break for the holidays, it appears that mortgage applications are on the rise again. As one might expect, refinancing is in the lead again. But home purchase applications have risen as well, reports MarketWatch:

Refinancing applications jumped 21.8% in the week ended Jan. 8 compared with the week before, which was shortened for the New Year’s holiday. Applications for mortgages to purchase homes rose a seasonally adjusted 0.8% on a week-to-week basis.

With the home buyer tax credit extended and expanded, it is no surprise that people are starting to consider buying homes again. Of course, some of these mortgage applications will be rejected, without good credit scores, but the increase in applications is heartening for the housing market.

And, of course, it makes sense that refinancing applications are on the rise. With mortgage rates still hovering near historical lows, it is natural that home owners want to take advantage. When you refinance to a lower interest rate, it is possible to save thousands of dollars on your home loan.

With signs of economic recovery showing, there are concerns that inflation could come with economic growth. This is a common thought, since economic growth often means that prices rise as well, eroding the purchasing power of the dollar. And, indeed, an economist at RBS Securities Inc. believes that inflation is on the way, reports BusinessWeek:

“Inflation will start to tick up again as we get stronger growth,” Stanley said today in an interview on Bloomberg Radio. “I don’t think the Fed is ready to own up to that.”

As a result, there are some expectations that the Fed will have no choice but to raise interest rates in order to combat inflation. It is possible that the Fed will raise rates to 3% by the end of 2010, from their current rate at between 0% and 0.25%.

For savers, this is good news, since it means that they will see a higher yield on their cash investments. For borrowers, though, it means that they will have to pay more in interest charges. If you have a variable mortgage rate, it might be time to refinance. If you have credit card debt, it is best to pay down as much as you can before rates move even higher than they already are.

In the time frame of our short attention spans, this recent recession has been a bit long. Many people who have changed their spending behaviors in accordance with economic conditions appear ready to slide back into pre-recession habits. At least that’s the hope offered by retailers reporting their December sales results.

Last month saw the best monthly retail sales in more than 20 months, with consumers ready to spread a little Christmas cheer after abstaining during the recession. Additionally, rock-bottom discounts in the post-holiday sale fervor further tempted consumers. But, of course, the real point is that consumers appear to be developing comfort with spending money again.

While this is likely to provide a boost to the economy, it is not likely to do much in terms of actually helping individual finances. This is because, in spite of the frugality seen in recent months, many Americans are still in debt. While the savings rate has risen, and debt has decreased, it hasn’t been by enough to overcome the credit spending spree that characterized the 15 or so years leading up to the most recent recession.

If consumers are already tired of frugality and ready to dive back into the instant gratification of credit spending, all it will do is once again raise their debt, reduce their savings — and put them in a worse position for the next economic downcycle.

The U.S. economy is expected to continue to show improvement as we move into 2010. The improvement is likely to continue at a modest pace, though. As the new year gets underway, the economy is expected to slowly expand. Rapid expansion is not predicted, since there still remain significant challenges to the economy. Action Forex reports on difficulties still facing the U.S. economy:

Furthermore, we should not forget that the Fed signaled within the FOMC rate decision that economic activity remains under pressure from elevated unemployment, lower income growth, lower housing wealth, and tight credit conditions continue to weigh down on economic activity, as the economy will probably remain weak and will only recover gradually, while the Feds still believe that the ongoing economic weakness will continue to weigh down on inflation.

Until the employment picture begins to show marked improvement, we are unlikely to see a great deal of economic recovery. Until then, chances are that economic improvements will be small and slow in coming.

Wishing you a Happy and Successful New Year!

May you enjoy increased prosperity, and hopefully set resolutions that will lead to a better situation.

Even though there are hopes of economic recovery, things are moving slowly, even on the housing market front. With prime mortgage borrowers slipping into delinquency, and mortgage lenders still being tight with their qualification requirements, it is little surprise that the housing market isn’t moving much.

As a result, home prices remain flat. The latest Case-Shiller home price index shows that October saw flat home prices, and that October did not keep pace with the rest of the year. However, that may have been due to the fact that the fate of the home buyer tax credit was in doubt. Now that the credit has been extended and expanded, there are hopes that the housing market will pick up pace — and that home values (and prices) will increase.

The buyer’s market may soon be coming to an end.

This week, mortgage applications have dropped. The Mortgage Bankers Association is reporting that applicants are holding off a bit. This is not especially surprising, with the holiday approaching. Indeed, the MBA is taking next week off, and not planning to release data on mortgage applications.

As is usually the case, most mortgage applications were related to refinance. Nearly 76% of mortgage applications were from those wishing to refinance. This is not surprising, since rates are near historic lows, and many homeowners are interested in refinancing to a lower rate in order to save money.

It will be interesting to see how things go starting in the new year, and whether the expanded and extended home buyer tax credit will contribute to a pick up in new mortgage applications.

The economy continues to struggle toward recovery with the latest jobless claims numbers in today. Initial claims rose more than expected today, belying yesterday’s Fed statement. However, the news isn’t all bad. MarketWatch reports on the silver lining associated with the latest jobs numbers:

Ian Pollick, economist at TD Securities, said that the rise in jobless claims was unsettling but that he was comforted by the fact that claims remain below the 500,000 mark.

Despite the increase, analysts said that claims remain on a downward trend.

So it appears that things, in general, are moving in an overall positive direction for the economy. As a result, then, it is little surprise that mortgage interest rates continue to inch upward.