What a great weekend.  The weather finally realized it was Summer and brought us perfect conditions for Hoopfest and Ironman!  There was a ton of news from Washington last week.  We have been recovering from the deepest financial crisis since the Great Depression. The government, led by the Fed, has been firing on all cylinders ever since. In my opinion, they started a bit late and that became part of the problem as we were convinced the markets could survive what was then termed a "sub-prime crisis." Well, it became much more than that. Since this late start, the Fed has been doing just about everything besides washing America’s dishes.   From day one, this has been a crisis of confidence. The public and the markets must be convinced that the economy will recover. We must not think or speak negative thoughts. It may take some time, but employment will grow and as employment grows, Americans will purchase houses and cars. Then our worry will be when will the Fed raise rates and how will we pay for all the money we have spent. Meanwhile, today we have an unprecedented opportunity to take advantage of bargains courtesy of the Federal Reserve Board.

 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.

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.

Interest Rates -Rates fell to their lowest levels since Freddie Mac started tracking them in 1971. Freddie Mac announced that for the week ending June 24, 30-year fixed rates averaged 4.69%, down from 4.75% the previous week. The average for 15-year fixed fell to 4.13%.

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.