The market commentary material provided is from a third party vendor, MBSQuoteline, and is not necessarily the opinions of Roma Liu and the employees or staff of Rate One Financial. This information is intended for educational purposes only and should not be construed as investment and/or mortgage advice. Additionally, the material is deemed to be accurate and reliable, but there is no guarantee it is without error.

A new President took office, a large fiscal stimulus package moved closer to passage, and investors became more concerned about the impact of the enormous amount of debt which will be issued to pay for all the government programs. The most recent proposal called for an additional $825 billion to stimulate the economy. As the government raises money by selling Treasury bonds, interest rates offered on all long-term bonds increase to compete for investors. In anticipation of this added supply of Treasury bonds, mortgage rates rose a little during the week.

The details of the new administration's fiscal stimulus plan are still being debated, but the need for one is generally agreed. Former Labor Secretary Reich estimated that the US will lose another 3 million jobs during 2009 if the government does not pass an economic stimulus plan soon. According to Fed Chief Bernanke, a large fiscal stimulus package would provide a "significant boost" to the economy. Expectations for the added supply of debt may have moved mortgage rates a little higher, but the benefits of a stimulus plan for the housing market could be significant. Big picture, more jobs means more potential home buyers. In addition, specific measures are targeted directly at the housing market, including proposals to help prevent foreclosures and to improve the terms of a first time homebuyer tax credit. The new administration has stated that swift passage of the stimulus plan is one of its top priorities.

In the housing sector, December Housing Starts fell to a record low. Building Permits, a leading indicator, showed similar results. The slowdown in the building of new homes will help reduce the inventory of unsold homes on the market.

Also Notable:

*Continuing Jobless Claims rose to the highest level since 1982

*The Fed's Yellen favors "pulling out all the stops" to stimulate the economy

*Oil prices rose to $43 per barrel, down from $145 per barrel in July

*The Fed purchased $19 billion in agency MBS during the weekly period ending 1/21

Average 30 yr fixed rate:

Last week:??? +0.01%

This week:??? +0.16%

The highlight next week will be Wednesday's Fed meeting. With the fed funds rate close to zero, rate cuts may no longer be an option. The Fed has many other tools at its disposal, though, and the accompanying statement will be highly anticipated.

A wide range of economic data will come out next week as well. Gross Domestic Product (GDP) for the fourth quarter will be released on Friday. GDP is the broadest measure of economic activity. Durable Orders, another important indicator of economic activity, is scheduled for Thursday. The Chicago PMI national manufacturing index will come out on Friday. Housing market activity will be revealed in the Existing Home Sales and New Home Sales reports. Consumer Confidence and Consumer Sentiment will round out a busy week.

01/23/09