I love this stuff!  For my Alexandria Blog readers,  Here’s some tidbits:

• HOUSING STARTS END 2009 ON A WEAK NOTE.  Housing starts fell 23,000 units to an annual pace of 557,000 in December as the second straight rise in multi-family activity was unable to offset a drop in single-family building.  Permits were up sharply.  SINGLE-FAMILY HOUSING STARTS : December @472K.  Single-family activity has come up off the bottom registered in early 2009 and we do not expect a retest of these lows.  However, strength from here may be somewhat limited.
•  MORTGAGE BACKED SECURITIES.   Ben Bernanke and other members of the FOMC have made no secret of their intention to end the Fed’s quantitative easing program.  Most of the lending facilities will expire early this year and the Mortgage Backed Securities (MBS) purchase program is expected to wind down at the end of March.  Ending the Fed’s unconventional easing measures is an essential precondition for any subsequent  tightening.   The Fed cannot start tightening policy until it stops easing.  The switch from easing to tightening will not be instantaneous.  The Fed will need to review the economy’s performance in the absence of quantitative  easing and there is some discussion that MBS purchases will continue beyond March 31. 
• CONSUMER CREDIT INSIGHTS. De-levering Continues at Full Tilt.  Despite solid retail sales in November consumers slashed their credit usage by another record amount.  Revolving credit outstanding declined by more than $13 billion in November alone and is down nearly $90 billion over the past year.  While we expect the economy grew strongly in the fourth quarter on the back of a massive swing in inventories, consumers cannot be counted upon to use their credit cards to propel the economy forward at the same pace into 2010.  We expect that most consumers will remain more cautious in their use of credit over the medium-term as the lessons of the past decade are fresh in their minds.  At the same time consumers are likly to continue adding to their savings at the fastest pace since before the housing boom.     As we move through 2010 we expect that interest rates will trend higher and consumer rates are likely to be affected as well.  Most notably the Fed’s plan to end purchases of MBS at the end of the first quarter should put upward pressure on mortgage rates even as we expect treasuries to be moving higher.  The Fed has artificially compressed the spread between the 30-year conventional mortgage and its traditional benchmark the 10-year Treasury.  When the Fed stops soaking up MBS issuance the spread is likly to widen considerably.  As a result, we expect mortgage rates to climb back above 6 percent by the middle of the year.  This may constrain origination activity.

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Source:   U.S. Department of Commerce, NAHB and Wells Fargo Securities, LLC