Mortgage Rates Surge On May Retail Sales Figures

The jobs market is recovering slower than expected, and so is housing. But neither condition has slowed U.S. consumers.

According to the Census Bureau, Retail Sales rose for the 11th straight month in May. Excluding cars and auto parts, sales receipts climbed to $322 billion last month. It's an all-time high and another example of the U.S. economy's resiliency.

Wall Street didn't expect such results. As a result, mortgage rates worsened Tuesday.

By a lot.

The connection between Retail Sales and mortgage rates can be fairly tight in a recovering economy. Retail Sales accounts for almost half of all U.S. consumer spending, and nearly one-third of the economy overall. The May report, therefore, showed the economy may be on more solid footing than economists expect.

Plus, lately, as the economy goes, so go mortgage rates nationwide. 

When the economy has shown signs of life, mortgage rates have increased. When the economy has shown signs of a slowdown, mortgage rates have dropped.

It's why mortgage markets reacted the way they did Tuesday; May's Retail Sales data was strong. The resultant surge in conforming mortgage rates -- from market open to market close -- turned into one of the year's fiercest, raising average mortgage rates well off their 7-month lows established earlier this week.

At today's rates, each 0.125 percent change in rates yields a payment difference of $7.50 per $100,000 borrowed. Yesterday, some product rates rose by as much as 0.250 percent. It put a dent in home affordability and household budgets.

With Retail Sales are up 8 percent from last year, therefore, and showing few signs of a slowdown, today may be a prudent date to lock a rate with your lender. As the economy continues to grow, rates are expected to rise.

Retail Sales Rise For 7th Straight Month; Mortgage Rates Worsen

If consumer spending is a keystone element in the U.S. economic recovery, a full-on rebound is likely underway.

Tuesday, the Census Bureau released its national January Retail Sales figures and, for the seventh straight month, the data surpassed expectations. Last month's retail figures climbed 0.3 percent as total sales receipts reached an all-time high.

It's good news for the economy which is scratching back after a prolonged recession, but decidedly bad news for people in want of a mortgage across the state of utah. This includes home buyers and would-be refinancers alike.

Because consumer spending accounts for the majority of the U.S. economy, Retail Sales growth means more economic growth and that draws Wall Street's dollars toward riskier investments, including equities, at the expense of safer investments such as mortgage-backed bonds.

On the heels of the Retail Sales report's release, bond prices are falling this morning. As a consequence, mortgage rates are rising. It's the same pattern we've seen since mid-November -- "good news" about the economy sparks a stock market frenzy, casuing mortgage bonds to rise.

A sampling of other recent good-for-the-economy stories include:

• Corporate earnings are rising quickly (Marketwatch)
• Existing Home Sales up 12% month-over-month (CNN Money)
• The Fed says the economy looks "brighter" (Bloomberg)

The days of 4 percent, 30-year fixed rate mortgages are over. 5 percent is the new market benchmark. Unless the economy keeps showing strength. Then, that number may rise to six percent.

If you're thinking of buying or refinancing a home, consider how rising rates will hit your budget. You may want to take that next step sooner than you had planned -- if only to protect your monthly payments.

Retail Sales Weak In December; Home Affordability Gets A Boost

Consumers keep spending, the economy keeps growing.

Mortgage rates are easing lower this morning on just-released, slightly worse-than-expected Retail Sales data from December 2010.

Excluding motor vehicles and auto parts, December's sales receipts were $1.5 billion higher from November. Analysts had expected a number north of $2 billion.

Despite falling short of estimates, however, December's reading is the highest in Retail Sales history, surpassing the previous record set in July 2008, set during the recession. In addition, December's strong numbers helped 2010's year-over-year numbers go positive for the first time in 3 years.

Although the data is a mixed bag for Wall Street, home affordability is improving today.

The link between Retail Sales and home affordability may not be up-front obvious, but in a post-recession economy like ours, it's often tight. Retail Sales is another name for "consumer spending" and consumer spending makes up more that 70% of the U.S. economy.

As spending grows, the economy tends to, too.

Investors recognize this and start chasing "risk". It becomes a boost for the stock market, but those gains are made at the expense of "safe" asset classes which include mortgage-backed bonds. Mortgage-backed bonds are the basis for conforming and FHA mortgage rates so, as bond markets sell off, asset prices fall and rates move up.

Thankfully, rate shoppers will avoid that scenario today -- at least for today. December's Retail Sales results are a factor in the bond market's early-day improvement. Conforming and FHA mortgage rates across the state of utah should be lower today.

Despite the good news, if you're shopping for a mortgage, consider locking your rate as soon as possible. Mortgage rates are coming off a 2-week rally and look poised to reverse appear -- especially with a full docket of data due for next week. As mortgage rates rise, purchasing power falls.

What's Ahead For Mortgage Rates This Week : December 27, 2010

Mortgage markets worsened again last week as the holiday-shortened sessions did little to buck recent momentum. Although Freddie Mac reported mortgage rates dropping 0.02% from the week prior, loan officers on the street will report the opposite. Rates did not fall last week.

Conforming mortgage rates in utah moved higher for 7th straight week.

For rate shoppers and home buyers, it's been a harrowing two months.  

Since the Federal Reserve announced its QE2 program November 3, 2010, mortgage rates have moved from all-time lows to 7-month highs. Mortgage payments now cost $38 more per month per $100,000 borrowed as compared to the day before the stimulus was announced.

Mortgage rates look poised to increase again. Here's why.

A major reason why mortgage rates were so low, for so long, was that the U.S. economy was suffering. Consumer spending was slow, business forecasts were dour, and job growth was negative. These conditions lasted for longer than a year.

Lately, however, the conditions are changing:

• Consumer spending is up 5 months in a row (Bloomberg)
• Fannie Mae is boosting its economic outlook for 2011 (WSJ)
• Job growth is slow, but positive (Reuters)

And, furthermore, housing appears to be on solid ground. Existing Home Sales and New Home Sales improved last month, and home supplies are dropping. This, too, is good for the economy, which, in turn, is bad for mortgage rates.

This week, don't be surprised is mortgage rates rise again. The week is again shortened by holiday and there's a host of new data that may signal economic improvement including Pending Home Sales, consumer confidence surveys and the Case-Shiller Index.