Overview: Data released over the past week revealed that housing inventory is at its lowest level since 1999. In a familiar refrain, a further rally in the stock market pulled assets away from bonds over the past week, which was negative for mortgage rates. The brief government shutdown had little effect, and mortgage rates ended the week higher.

With the last short-term government funding bill set to expire on January 19, investors were keeping a close eye on the Senate’s last-minute efforts to pass a new bill. The Senate failed to gather enough votes, and the government shut down at the end of the day on Friday. However, an agreement was reached on Monday to extend funding until February 8. Since the shutdown was so short, the impact on mortgage rates was minor. Funding the government past February 8 may be tied to an immigration bill, which means that it again may be difficult for Congress to gather the necessary votes.

The housing data for December released over the past week revealed a decline from November’s elevated levels to readings which were more in line with prior months. Sales of previously owned homes in December fell 4% from November. A lack of inventory held back sales in many regions. Unsold inventory was at a 3.2-month supply, which was the lowest reading on record since tracking began in 1999. Despite this, 2017 overall saw the highest level of sales of previously owned homes since 2006.

In December, single-family housing starts declined 12% from November. It’s worth noting that this data is highly volatile from month to month. Single-family starts also are strongly influenced by the weather, and December saw particularly bad weather conditions in many parts of the country. Building permits for single-family homes, a leading indicator of future housing starts, increased in December. Single-family starts in 2017 overall were 9% higher than in 2016. Week Ahead

Looking ahead, there will be a European Central Bank (ECB) meeting on Thursday, which could influence U.S. mortgage rates. Investors will be looking for guidance about the pace of tightening by the ECB. The next U.S. Federal Reserve meeting will take place on February 1. No change in policy is expected. In addition, the first reading for fourth quarter gross domestic product (GDP), the broadest measure of economic activity, will come out on Friday. The core Personal Consumption Expenditures (PCE) price index, the inflation indicator favored by the Fed, will be released on January 29.