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Happy HOT Monday. If you love hot weather, you're going to love this week. It is forecast that we could hit 100 degrees by this weekend. For myself, I'll stay inside thank you. I melt in the hot weather.

The stock market is up again, for the 6th straight session. So far, the DOW is up approximately 7% since last Monday. Usually when we see the stock market up, we see investors running from bonds, so mortgage rates rise too. But, here's what we're hearing today. So far, 69 of the companies on the S & P 500 have reported earnings. 59 of those companies have beat estimates on earnings, so the investors on Wall Street are happy folks and buying. BUT, this is a huge earnings week with many of the major S & P players yet to report. Oil is up to almost $65/barrel, and most metal commodities, like gold, silver, etc, are way up as well.

Companies like Apple and Caterpillar are "biggies" that sometimes put a damper on earnings week, and have yet to report. While they may report good earnings, they tend to also add comments that earnings going forward are iffy. So, some investors are still buying bonds. Also, we have to keep in perspective that some of these great earnings are from banks and investment companies, that are cashing in on higher fees and stock issuance to cover their TARP loans. Others are retailers that are reporting better than expected earnings, but have slashed their workforces and inventories to bare minimums to survive. So, yes, investors are still nervous, especially as Fed Chairman Ben Bernanke will be testifying before Congress this week again about the state of the economy and an exit strategy from all this stimulus and federal spending, to keep future inflation at bay.

In addition to a proposed exit strategy, it is anticipated that Bernanke wants to keep interest rates low as long as possible to help our employment numbers. But, in order to be allowed that leeway, he will have to convince Congress that he also has a plan to keep inflation in check. (I wouldn't want to be Ben Bernanke right now, would you?)

So far, most economists are saying that "leading indicators signal the U.S. economy is nearing the end of this recession." However, the caveat is that unemployment is still way too high and housing prices, over much of the nation, have yet to stabilize. However, more and more economists are predicting that this recession could end by the end of this year! Of special significance are three factors:

1. The fantastic earnings reports by lenders indicates that credit is loosening up a bit - which is good news for both businesses and consumers.

2. Building permits for new home construction were up 8.9% in June. This will put many people back to work.

3. The Federal Reserve is sitting on $877.1 billion dollars in bank excess reserves. This is money that is "available for lending," but is being held by the Federal Reserve instead to keep banks from pumping those funds into the economy too quickly (which would result in inflation.) The Feds are paying interest on those reserves (with taxpayer dollars, of course), to incent the banks to not lend too much too quickly.

The end result is that mortgage rates are fantastic. Best rates on 30 year fixed rate loans are hovering around the 5% range again. 5/1 ARMs are way down in mid 4% range. However, we probably should not expect rates to stay this low for the long term. One of the leading indicators of a healthy economy is higher yields on long term treasury bonds, so savvy investors are watching for yields to rise as soon as possible. With economic recovery potentially around the corner, bond yields, and mortgage rates will begin to rise.

Have a fabulous week.

Best regards,

Shelby Bateson

503-819-6545 phone

1-866-626-2828 fax

Lic # ML-3604

* Best rates apply to borrowers with Loan to Value at or below 90% and credit scores of 740+. ** Best FHA rates apply to credit scores of 660 and up. There are upward rate adjustments for lower credit scores on all loan programs. All rates are subject to change without notice. These rates are NOT APRs - do not include closing costs.