If you can't see the newsletter, or would like to view it online, use this link

If you have received this newsletter indirectly and would like to be added to our weekly distribution list, use this link

In This Issue

Last Week in Review: Washington was at it again, with big news from both Congress and the Fed. Learn what this means for you...and for home loan rates!

Forecast for the Week: Two juicy economic reports bookend the week, bringing highly anticipated news on inflation and the labor market.

View: Hitting the road for July 4th? Want to avoid a speeding ticket? Read on below.

Last Week in Review

What happens in Washington doesn't stay in Washington! And there was a lot happening in Washington this past week, between the Fed’s two-day meeting and actions in Congress. So how will all of these happenings impact you…and home loan rates, which are near all-time lows? Read on for details.

Last week, the Fed decided to keep the Fed Funds Rate at 0.25%, and also reiterated in its Policy Statement that economic conditions warrant keeping the Fed Funds Rate low for an “extended period”. First, what is the Fed Funds Rate? It is the lending rate banks charge each other for the use of overnight funds, and it is used as a base rate that many other lending rates are based on, for consumer and business loans.

And second, why is the “extended period” language significant? The Fed has to time very carefully any action – or even hints of action – on raising the Fed Funds Rate, which they have held at the lowest levels in history for the last year and a half. If the Fed raises the Fed Funds Rate too soon, it could slow economic activity and cause a "double dip" recession. However, if the Fed waits too long to raise the Fed Funds Rate, inflation could result. Remember, inflation is the arch enemy of Bonds and home loan rates...and signs of inflation could definitely cause home loan rates to worsen from their current low levels.

Even though there have been more concerns expressed by various Fed members about inflation and the long term effects of keeping the Fed Funds Rate too low for too long, the economic data recently reported (such as the weak Jobs Report and other reports showing inflation is tame at present) as well as the ongoing issues in Europe helped the “extended period” language to survive through another Fed meeting. This is an important issue to keep watch on.

Congress was just as busy as the Fed last week. On Thursday, the Financial Reform Bill was finally reconciled between the House and Senate. The final draft includes a Consumer Financial Protection Agency, which will have the authority to police banks for mortgage lending and credit-card abuses. The bill will move to the President for his signature once both houses of Congress approve the final version.

However, Congress did not pass the extension of the Home Buyer Tax Credit. Note: This extension was only going to be for people who were under contract by the initial April 30th deadline, extending their June 30th closing deadline to September 30th. The extension was part of the larger Jobs Bill, which included State aid and an extension of unemployment benefits for people out of work more than six months – and would have added $33B to the deficit. Meanwhile, the National Association of Realtors is saying that up to 30% of homes that went under contract by the April 30th deadline of the Homebuyer Tax Credit will likely not close by the current June 30th deadline.

There was other housing news last week, as both New Home Sales and Existing Home Sales were well below expectations. While a decline in sales was expected after people were racing to qualify for the April 30th Tax Credit deadline, the numbers are still a bit of a disappointment.

However – home prices remain affordable, and home loan rates are far from disappointing at the moment...last week they reached all time low levels! If you or anyone you know would like to learn more about this exceptional opportunity, please don’t hesitate to call or email. Or forward this newsletter on to anyone you think may benefit and I’d be happy to consult with them free of charge.

The FASTEST WAY TO TAKE THE FUN OUT OF ANY ROADTRIP IS TO COME HOME WITH A SPEEDING TICKET. CHECK OUT THE MORTGAGE MARKET GUIDE VIEW BELOW TO LEARN MORE ABOUT AVOIDING SPEED TRAPS.

Forecast for the Week

There will be plenty happening this week, ahead of the Independence Day holiday. The week may start with a bang, as Monday’s Personal Income and Personal Spending Reports arrive, giving us a look at the Core Personal Consumption Expenditure (PCE) Index as well...which just happens to be the Fed's favorite gauge of inflation. Rest assured the Fed will be watching this report very closely. Any hint that inflation is heating up could definitely impact the Fed’s decision on rates and the “extended period” language at future Fed meetings.

Thursday brings another Initial Jobless Claims Report. Initial Jobless Claims came in at 457,000 last week and Continuing Claims at 4.55 Million. In addition, an additional 4.73M people are claiming EUC (Emergency Unemployment Compensation) benefits. The continuing high level of unemployment claims is disturbing, but things will improve. Remember, job losses come in the thousands as companies endure sweeping layoffs, but individuals are hired back one at a time. And remember – since the Jobs Bill has not been passed, more people will start to drop off extended unemployment benefits – and rejoin the workforce as formally unemployed.

And there could be some real fireworks on Friday, as the Labor Department releases the Jobs Report for June. Last month’s Jobs Report showed 431,000 jobs created in May. While on the surface this seems positive, the number was below expectations and also was primarily made up of temporary census workers…who will once again join the ranks of the unemployed when the 2010 Census has been completed. The Unemployment Rate did drop from 9.9% to 9.7%, but overall May’s Jobs Report was disappointing.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, home loan rates hit record low levels last week. I’ll be watching closely to see if this trend continues.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday, June 25, 2010)

The Mortgage Market Guide View...

A Safe and Ticket-Free Fourth!

In just a few short days, drivers across the country will hit the road to celebrate the Fourth of July with friends and family. If you’re heading down the road this coming weekend, remember that it’s never a good idea to speed – both for safety and financial reasons. After all, an accident or ticket can ruin your holiday weekend.

So make sure you have plenty of time and that you plan the most effective route. And...you may even want to take a minute to find out if there are any speed traps on your route that you should know about. Thanks to the website speedtrap.org, you can easily read about speed traps in communities across the country.

Simply visit speedtrap.org and click on the state and then the cities that you’ll be driving through. You can even add a speed trap you know about, so others can benefit from your knowledge.

Whether you’re traveling a few miles or a few hundred, have a safe and ticket-free Fourth of July!

Economic Calendar for the Week of June 28 - July 02