REAL ESTATE ECONOMIC UPDATE

Economic Update

Nov 6, 2006

Last week proved to be very interesting in regards to interest rates. Long-term rates dropped in the beginning of the week amid concerns that the economy was slowing. However, Friday's Employment Report spooked the markets--wages came in higher than expected and caused long-term interest rates to rise. But even with the up-and-down movement, long-term rates closed the week at about the same level they started at in the week.

The market is always looking for clues about what the Federal Reserve (Fed) will do with short-term interest rates. Long-term rates fell early last week because the market thought the Fed would lower short-term interest rates in early 2007. However, since the release of the Employment Report, the market now thinks it's unlikely the Fed will lower short-term rates in the near future. This drove up long-term interest rates.

With the market constantly in a state of flux, it's often difficult to keep track of where interest rates stand. Long-term interest rates remain historically low, which means if you're in an adjustable rate mortgage (ARM) - particularly an Option ARM - it's still a great time to take advantage of lower long-term rates and refinance into the safety of a fixed-rate mortgage