Retail Sales

What’s Ahead for Mortgage Rates This Week: June 14th

Mortgage markets posted four good days last week and one awful one.  Unfortunately for rate shoppers in Indiana, that one bad day outweighed the gains of the other four and mortgage rates worsened on the week overall.

Despite re-touching all-time lows on Tuesday and Wednesday, Conforming and FHA mortgage rates moved higher on the week.

There wasn’t much domestic data on which for mortgage markets to move so rates took their cues from global economic activity. Strong data from Japan and China, plus an improving outlook from the Eurozone, sparked optimism among Wall Street investors. Cash poured into the stock market and it happened at the expense of bonds — including the mortgage-backed ones.

It’s the primary reasons rates rose and not even the worst Retail Sales report in 8 months could undue the damage.

Often, weak Retail Sales data causes mortgage rates to fall. Last week, however, that wasn’t the case. 

This week, there’s cause for rates to rise again with Wednesday emerging as a “data day”.

First, at 8:30 AM ET, the government releases two key housing statistics and one major gauge for inflation — Housing Starts, Building Permits and Producer Price Index, respectively.  Strength in any or all three should lead mortgage rates higher.

Then, at 5:45 PM ET, Fed Chairman Ben Bernanke makes a public speech and anytime Bernanke speaks, mortgage rates can move.

Mortgage rates remain unnaturally low and a lot of Hoosiers have taken advantage already. If you’re a homeowner and you’ve wondered whether or not a refinance makes sense, talk to your loan officer straight away. Low rates like this can’t last forever so lock one in while you can.

Retail Sales

December Retail Sales Drop and Now Mortgage Rates Follow

Mortgage rates are dropping this morning on weaker-than-expected Retail Sales data from December. Lower rates means more bang for your home-buying buck.

Excluding motor vehicles and parts, December’s “ex-auto” sales receipts were down roughly $500 million from November. Analysts had expected receipts to grow.

The relevance of Retail Sales to home affordability isn’t obvious, but it’s definitely logical.

Retail Sales is directly related to consumer spending and consumer spending accounts for the majority of the U.S. economy. When consumer spending slows, the economy often does, too. It leads investors to seek out “safe” investments.

It’s the reason why stock markets often drop on weak economic data — stocks are among the riskiest investment classes available.

Conversely, the best place to find safety is in the market of government-backed bonds.  This world includes products like U.S. Treasuries and many of the mortgage-backed bonds that help set mortgage rates.  Weak economic data puts mortgage bonds in demand.

For a rate shopper in Northwest Indiana, this is good news.  More demand for mortgage bonds causes mortgage rates to fall.  Mortgage rates are lower this morning because Wall Street is shedding some risk.

December’s Retail Sales report closes out a year of generally-weak data. 2009 marks just the 2nd time that Retail Sales fell year-over-year since the government started tracking it 40 years ago. The other year was 2008.

For home buyers around the country and especially in Northwest Indiana, though, today may represent an opportune time to lock a mortgage rate.  Housing data is still improving and other economic indicators are showing strength.  Soon, Wall Street will shift from a “safe” mentality and move toward risk.

When it does, mortgage rates will rise.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

Retail Sales

Retail Sales and Home Affordability a Volatile Cocktail

If you wonder what mortgage rates and home affordability will look like next year, today’s Retail Sales data may hold your answer.

Versus October, November’s ex-auto sales were up by more than 1 percent. Analysts expected the increase, but not an increase of this magnitude.

“Ex-auto” means that motor vehicles and parts are excluded from the data.

Home values are increasing in many parts of the country and household net worths are rising, too. Therefore, we can infer from the Retail Sales report that U.S. consumers are starting to feel better about their individual finances, and about the economy overall. 

To homebuyers and rate shoppers, strong Retail Sales data may foreshadow higher mortgages ahead.  This is because sales data is a by-product of consumer spending and consumer spending accounts for more than two-thirds of the economy.

As spending increases, the economy tends to expand, drawing investment dollars into stock markets and away from bond markets - including mortgage-backed bonds, the basis for conforming mortgage rates. 

Less bond demand leads to higher rates and, therefore, lower levels of home affordability.

Despite the Holiday Season momentum, however, 2009 will likely mark just the second time that Retail Sales data fell year-over-year since the government started tracking it 40 years ago.  The other year was 2008.

But, if November’s Retail Sales is a reliable indicator of consumer sentiment overall, we should expect 2010 to rebound strongly.  And when it does, mortgage rates should suffer.

The housing market is recovering, mortgage rates are still near all-time lows, and the government is offering an $8,000 tax credit to qualified buyers through April 30, 2010.  If you plan to buy a home next spring, you may want to consider moving up your timeframe.  Waiting may be costly.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

Retail Sales

When Ben Speaks, Mortgage Rate Shoppers Need to Listen

On the 1-year anniversary of the Lehman Brothers collapse, Fed Chairman Ben Bernanke said Tuesday that the “recession is very likely over at this point”.  

His comments were supported by a Retail Sales report for August that was much better-than-expected.

Equities improved on the day, mortgage markets worsened, and home affordability suffered. 

The days of ultra-low mortgage rates may be coming to an end.

Since last September, mortgage bonds markets have been in Rally Mode.  As the Financial Crisis of 2008 worsened, investors fled the relatively risky world of stocks and moved dollars into safer investments like cash and bonds – including the mortgage-backed kind.

Risk aversion is common when market uncertainty exists but last year’s aversion was so strong that, by late-November, it had forced mortgage rates down to an all-time low. 

Since November, however, rates have been on the rise.  Stronger economic data and a general feeling of optimism have helped stock markets recover and some of those gains are coming at the expense of low mortgage rates.

Therefore, if you’re wondering what mortgage rates might do going forward, listen to the words of the Federal Reserve Chairman. If he sees economic recovery ahead, it’s probably going to happen.

It should spell higher mortgage rates into 2010.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

Retail Sales

Why Mortgage Rates Were Up for the Third Day in a Row

Mortgage markets worsened for the third straight Tuesday after the government reported June’s Retail Sales report came in slightly better than expected.

Since falling to near 5.000 percent last week, 30-year fixed conforming mortgage rates have risen by almost 3/8.

It’s a similar mortgage rate pattern to what we’ve seen over the last 10 months — rates drift down to near their “all-time lows”, and then surge higher over just a few days time.

This week’s movement, in particular, is vexing home buyers and would-be refinancers. 

Many people thought mortgage rates would break below the 5.000 percent threshold.  The markets, however, had other ideas.

In addition to the unexpectedly strong Retail Sales data, last month’s Producer Price Index reported higher than expectations, too. 

A rising PPI is important to rate shoppers because the figure is akin to the Cost of Living measurement for household, but for American businesses instead.  The thought goes that if business costs are rising, consumer costs will eventually rise, too, as businesses share their expenses with American households.

This is inflationary, of course, and inflation is awful for mortgage rates.  It’s part of the reason why mortgage rates closed higher again Tuesday.

All year long, mortgage rates have been jumpy and unpredictable.  This past week has been no different and it’s why you shouldn’t necessarily try to time for a market bottom with mortgage rates. 

If an interest rate looks good to you today and the payment is manageable, consider locking it in.  There’s no guarantee rates will ever fall back toward 5.

Retail Sales

What’s Ahead For Mortgage Rates This Week: May 18th

After a dreadful start to the month of May, mortgage markets improved last week, pushing mortgage rates lower overall.

It was the first week since late-April in which mortgage rates fell.

The biggest reason rates improved last week was because the economic optimism that was responsible for the stock market’s 30% gain since March faded somewhat.

Retail Sales came in weaker-than-expected as did Initial Jobless claims. Both of these data points show that the economy may not be recovering as quickly as investors had wanted to believe.

Combined with gas prices ballooning more than 10 percent over the last 3 weeks, it’s clear that consumer spending will be muted this summer and into fall.

Consumer spending is important because it accounts for two-third of the economy. If it’s slowed for any reason, the economy is less likely to emerge from the current recession as quickly as had been anticipated.

This is good news for mortgage rates because a slow economy tends to draw investors out of stocks and into bonds, including the mortgage-backed kind. More mortgage bond demand leads to higher bond prices and, therefore, lower bond yields and mortgage rates.

This week, there isn’t much data to watch and, because of Memorial Day, trading will be very light towards Thursday and Friday.

It’s during “calm” weeks like this that mortgage rates can make huge movements up or down. With no official announcements against which traders can make bets, every piece of news is a surprise.

If you’re still floating a mortgage rate, take some risk off the table by locking in this week.

Retail Sales

Home Affordability Increases On Weak Retail Sales Data

Home affordability improved again Wednesday after the government reported worse-than-expected results for April’s Retail Sales report.

Mortgage rates edged lower for the third consecutive day.

The impetus for the rate rally this week may be a long-awaited stock market correction. After touching multi-year lows in mid-March, the Dow Jones added 30 percent going into last Friday.

It has since lost close to 300 points and as those dollars leave the stock market, they’re finding their way toward bonds.

The demand is pushing bond prices up which, in turn, causes rates to fall.

Yesterday morning, the rally in rates picked up steam on the heels of April’s Retail Sales report. With figures off a half-percent from March and roughly 7 percent from 2008, investors are concerned that consumer spending may not be as strong into the summer months as previously expected.

Consumer spending is important because it comprises two-thirds of the economy and is believed to be the way out of the current recession.

If expectations of a recovery caused mortgage rates to rise recently, it makes sense that a revision of those expectations would cause rates to fall.

Markets are fickle, however, and the slightest bit of “good news” could pump cash back into stocks at the expense of bonds. Until then, however, enjoy the low rates — they may not last long.

Retail Sales

What’s Ahead for Mortgage Rates This Week: March 9th

Mortgage markets improved last week with investors’ renewed aversion to risk. To the benefit of home buyers, as major stock indices touch 12-year lows, investors are moving investible cash to the bond market.

For only second time this year, mortgage rates ended the week lower than where they opened.

Some of the bigger stories that caused mortgage rates to fall last week included:

• Unemployment reaching 8.1 percent nationwide
• The Fed reducing its economic outlook for 2009
• Investor concerns for blue chip General Electric

In addition, US Bank and Wells Fargo cut dividends by roughly 85 percent each. Both banks are considered well-run and positioned their respective cuts as a way to bolster balance sheets. Markets took it as a negative instead.

This week, there isn’t much economic news upon which to trade, save for Thursday Retail Sales data. Therefore, markets will look for other clues about the future of the U.S. economy.

Tuesday, Fed Chairman Ben Bernanke has a scheduled speech on financial reform and then Thursday Congress takes up mark-to-market accounting. It sounds like a dry topic, but mark-to-market is the accounting rule that makes banks take losses on assets they’ve yet to sell.

Some experts think mark-to-market accounting makes the financial system appear weaker than it is so this is why Congress is starting a debate.

If mark-to-market rules are loosened, it would likely spell good news for the stock market and bad news for mortgage rates. In effect, money would flow in the opposite direction as it did last week.

For now, though, mortgage rates are low. If you’re currently floating a mortgage rate with your lender, consider locking in. If there’s even a whisper that mark-to-market accounting rules will change near-term, mortgage rates should rise.

(Image courtesy: The Wall Street Journal Online)

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