HOME SALES DECLINE Over the past week, economic events have had very little effect on mortgage rates. Year-end volatility due to light trading volume has been the more significant influence. Mortgage rates ended the past week just slightly higher. The last batch of data released this year on housing activity showed that we are ending 2015 at better levels than in 2014, but below the best levels of this year. A surprising 11% drop in existing home sales in November can be, at least partially, attributed to longer closing times resulting from new closing disclosure regulations. While existing home sales dropped sharply, NAR's Pending Home Sales Index for November was nearly unchanged. This index measures contracts to buy existing homes which were signed during the month. This measure would not have been affected by the new regulations. Fannie Mae projects the improvement in housing activity seen in 2015 will continue in 2016 with a 3.9% increase in total homes sales. The most recent inflation reading, the core PCE price index, showed that in November inflation remained well contained, at an annual rate of just 1.3%. Both low commodity prices and a stronger dollar have helped keep inflation low in 2015. However, the effect these have on inflation is transitory. Unless commodity prices continue to fall or the value of the dollar continues to rise, future readings will not reflect these benefits. The Fed's effectiveness at keeping expectations for future inflation low will influence mortgage rates in 2016.