** according to Freddie Mac **

30-yr Fixed – Lower

This Week:  5.01% — lowest since 1971

Last Week:  5.10%

1yr Ago:  5.87%

15-yr Fixed – Lower

This Week:  4.62%

Last Week:  4.83%

1yr Ago:  5.43%

5/1 ARM – Lower

This Week:  5.49%

Last Week:  5.57%

1yr Ago:  5.63%

Highlight of This Week’s Major Economic Reports

Despite a recent uptick in Treasury yields, mortgage rates actually fell during the first full week of the New Year.  One major catalyst driving this dip is the start of the Fed’s foray in purchasing mortgage-backed securities.  The $500 billion budgeted for this shopping spree is helping to increase demand, which in turn has kept rates low.

Stocks also took a hit throughout the week as retailers and other corporations took turns issuing earnings warnings.  This then led to a ‘flight to quality’ mad-rush over to the bonds markets, thereby further driving down rates.

And, lastly, there was the much-anticipated Employment Report.  We knew it wasn’t going to be pretty.  524,000 jobs lost in December, which brought the final 2008 tally to 2.6 million.  The unemployment rate now sits at a level we haven’t seen in 16 years – 7.2%.  Despite the gloomy outlook for the job market, most economists do not anticipate the unemployment rate to hit double-digit levels, since the economy (i.e., GDP) is expected to make a comeback (albeit a modest one) in the second half of the year.

What to Look for Next Week

We’ll get to find out just how bad the worst holiday shopping season in years was when the latest Retail Sales figures come out on Wednesday.  Then, of course, there are the all-important inflation gauges in the Consumer Price and Producer Price Indexes.  Inflation is not expected to be an issue at all; it’s more so seeing if the numbers start to creep into deflationary territory, as many economists fear.

Short-Term Rate Outlook

Fractionally Lower

Marie Funston

Senior Mortgage Advisor | Cell:  (512) 750-7270

Fannie Mae is Federal National Mortgage Association or FNMA – The Company was chartered by the congress, however it is share-holder owned. Currently they are the principal supplier of residential mortgage funds.

Ginnie Mae or the Government National Mortgage Association or GNMA – The Company is a part of the United States Department of Housing and Urban Development (HUD). This Government agency was created by Congress to provide mortgage funding for lenders who are purchasing with a VA or other Government owned / backed Loans.

Freddie Mac is the Federal Home Loan Mortgage Corporation or FHLMC – This Company is a shareholder run company who creates a secondary mortgage market by purchasing all forms of loans from the primary market for mortgage lenders.

Generally speaking the two share holder based companies do not have much if any federal involvement. Recently due to the Real Estate Mortgage Crisis, and the subsequent repercussions, the federal government has altered their position. They now hold influential positions with in both companies to attempt to circumvent further problems. Time will tell if this was the correct choice for the country and the real estate market place.