Consumer Spending

Home Affordability Set To Worsen On Thursday’s Retail Sales

Consumer spending continues to rise nationwide, fueled by jobs growth and a rosier outlook for the U.S. economy. Unfortunately for mortgage rate shoppers in Crown Point Indiana, it may also lead to higher mortgage rates later this week.

Thursday morning, the Census Bureau will release its U.S. Retail Sales data for December. The report is expected to show an 18th consecutive monthly increase, with analysts projecting sales volume higher by 0.4 percent from November.

This would be double the increase from last month, which saw a 0.2 percent increase in Retail Sales.

The Retail Sales report tallies receipts collected by retail and food-service stores nationwide. When the sum of these receipts rise, it puts pressure on mortgage rates to do the same. The connection is straight-forward.

Retail Sales are the largest part of “consumer spending” and consumer spending accounts for the majority of the U.S. economy — up to 70 percent, by some estimates.

As the economy goes, so go mortgage rates.

Remember: today’s ultra-low mortgage rates have been partially fueled by weak economies — both domestic and abroad — going back 4 years. Stock markets have sold off as economies have faltered worldwide, leading investors to seek refuge in the relative safety of U.S.-backed mortgage bond market. The new-found demand for mortgage-backed bonds has helped drop mortgage rates to levels never seen in history.

When economic recovery is apparent, therefore, we should expect a mortgage rate reversal, and should expect for it to happen quickly. Stock markets should rise; bond markets should fall. Mortgage rates will climb. Rate shoppers will lose.

Last week’s strong jobs report sparked hope for the U.S. economy. If Thursday Retail Sales data reveals similar strength, the risk in “floating” your mortgage rate may be too great. The safer play is to lock your rate today.

The Retail Sales report will be released at 8:30 AM ET.

Consumer Spending

Top Real Estate Headlines for Week Ending: November 5th

The weekend is just a blink away. Before we get lost in our weekend affairs, let’s take a minute to review what the top real estate and mortgage healdines were this week according to the National Association of Realtors.

• Golder: Stand Up for Home Ownership
  “It’s time to tell the world that home ownership is still the heart of the American Dream,” 2010 NAR President Vicki Cox Golder told a packed ballroom of real estate practitioners in New Orleans.
• September Pending Home Sales Slip 1.8%
  Tight credit and appraisals coming in below a negotiated price continue to constrain the market, but there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures.
• Fed’s Aggressive Policy Sparks Critics
  After the Federal Reserve announced Wednesday that it intended to buy $600 billion in Treasury securities through June, critics warned of inflation and other unintended results.
• 30-Year Mortgage Rates Inch Up
  For the third straight week, 30-year mortgage rates continued their upward climb. The average 15-year rate for the week ended Nov. 4 was 3.63 percent.
• How Election Results Impact Real Estate
  Among other things, 10 of the 12 state attorneys general on the executive committee that have been heading the foreclosure probe lost their re-election bids and won’t be returning to office. What does this mean for real estate?
• Why Reverse Mortgages Are Popular
  Changes to legislation and the housing market are making this financing option attractive for home owners.
• You’re Refinancing Again?
  Owners who refinanced just a year ago might be looking to do it again while rates continue to drop.
• Housing Starts Rise in September
  The U.S. Commerce Department reports that increased spending in commercial projects helped push construction spending up.
• Consumers Put Credit Card Debt Ahead of Mortgage
  A Mortgage Bankers Association panel discussed the shifting priorities of borrowers who now believe paying down credits cards is more important than paying their home loan.
• 3 New Anti-Foreclosure Strategies
  Critics of the government’s Home Affordable Modification Program offer fresh proposals to slow foreclosures.
• Minority Home Ownership Drops Steeper
  While the overall rate of home ownership slipped just 0.7 percent year over year, a much more pronounced slide occurred among the nation’s minorities.

These were the top real estate and mortgage headlines for the week ending November 5, 2010.

Want to know how these national real estate headlines could impact you right here locally in Northwest Indiana? Subscribe to this blog, Today’s Real Estate Reality, and let our collective years of real estate experience in Northwest Indiana guide you to an informed and successful real estate transaction today.

Consumer Spending

Obama’s Right. Jobs Report Wasn’t As Bad As The Headlines

In June, for the first time since December 2009, the U.S. workforce shrank.

According to the Bureau of Labor Statistics, the economy shed 125,000 jobs last month even as the Unemployment Rate dropped to 9.5 percent. The drop in the Unemployment Rate is being attributed to fewer Americans looking for work.

At first glance, the jobs report looks weak but a deeper look shows something different.

Excluding the 225,000 government Census workers that recently left the workforce, the total number of employed persons actually grew by 83,000 in June. That’s 50,000 more working Americans as compared to May.

And, since the start of the year, the U.S. workforce has grown by 857,000.

Jobs growth is closely tied to economic growth because more working Americans means more disposable income which, in turn, stokes consumer spending. Job growth is better than job loss.

Consumer spending makes up the majority of the U.S. economy so as consumer spending grows, investor mentality tends to shifts toward “return on principal” (i.e. stock markets) from “safety of principal” (i.e. bond markets).

A move like this is often bad for home affordability because falling demand for bonds is tied to higher mortgage rates. In addition, demand for homes is likely to increase with the growing number of Americans earning a paycheck. Thereby helping to push home prices higher.

The June jobs report therefore should be bad for rate shoppers and home buyers in Valparaiso Indiana. Fortunately, the markets aren’t reacting that way. Mortgage rates for now are slightly improved since the jobs report’s release.

Perhaps Wall Street is watching the wrong figures, but don’t let that be your loss. If you’re shopping for a mortgage, a home, or both, now may be your best time while rates are still low and with home prices down. Make a move before traders change their tune and you lose your window of opportunity.

Consumer Spending

Where Does The Money Go?

Where does the money go?

If you’re like most U.S. consumers, more than half of it goes to housing and transportation costs.

According to the government’s most recent Consumer Expenditure Survey, spending patterns are little changed from years prior. 

More money is spent on entertainment and less money is spent on dining out.  Beyond that, the figures are somewhat static.

Meanwhile, using on the survey’s industry-by-industry breakdown, we can see how monthly housing payments and daily commuting costs impact a household’s budget.

For the budget-conscious, going out less often and bargain-shopping can help pad the bottom line, but not as much as living in a less expensive home or moving closer to work.

Even a refinance into lower rates can make a difference.