Mortgage Rates Climb Sharply After Retail Sales Report

The U.S. economy is expanding, fueled by a renewed consumer optimism and increased consumer spending.

As reported by the Census Bureau, Retail Sales in February, excluding cars and auto parts, rose 1 percent to $335 billion as 11 of 13 retail sectors showed improvement last month.

February markets the 19th time in twenty months that U.S. Retail Sales increased on a month-over-month basis.

Unfortunately, what's good for the economy may be bad for Marietta home buyers and mortgage rate shoppers. Home affordability is expected to worsen as the U.S. economy improves.

The connection between Retail Sales and home affordability is indirect, but noteworthy -- especially given today's broader market conditions.

First, let's talk about affordability.

Last week, the National Association of REALTORS® released its monthly Housing Affordability Index, showing that homes are more affordable to everyday home buyers than at any time in recorded history. For buyers with median earnings buying median-priced homes, monthly payments now comprise just 12.1% of the monthly household income.

The real estate trade group considers 25% to be the benchmark for home affordability. Today's payment levels are less than half of that.

The reasons why today's homes are so affordable are three-fold :

1. Home prices remain relatively low as compared to peak pricing
2. Fixed- and adjustable-rate mortgage rates remain near all-time lows
3. Average earnings are increasing nationwide

Rising Retail Sales, however, can derail the trend. This is because Retail Sales measures consumer spending and consumer spending accounts for roughly 70 percent of the U.S. economy. As the economy expands, the forces that combined to raise home affordability so high begin to wane. 

First, in a recovering economy, mortgage rates tend to rise and, throughout 2012 and 2013, home prices are expected do the same. Second, as average earnings increase, it can spur inflation which is bad for mortgage rates, too. 

Home affordability is at all-time highs today. But, in part because of February's Retail Sales data, we should not expect these levels to last. Mortgage rates are higher by 1/4 percent since the Retail Sales data was released -- roughly $16 per $100,000 borrowed -- and are expected to rise more throughout the spring home purchase season.

Retail Sales are up 6 percent from a year ago.

With Retail Sales And Consumer Confidence Rising, Home Prices Are Expected To Follow

The U.S. economy continues to show signs of a rebound.

According to the Census Bureau, Retail Sales climbed to $329 billion last month on a seasonally-adjusted basis, excluding automobiles. January's data marks the 18th time in 19 months that Retail Sales rose, a run that's increased total sales receipts by 11 percent.

This is big news because Retail Sales accounts for close to 70% of the U.S. economy.

In addition, consumer confidence is rising.

In a separate, joint report from the University of Michigan and Thompson Reuters, it was shown that consumer attitudes toward the economy and the future are improving, primarily the result of recent job gains.  

The Survey of Consumers posted its highest value in 12 months.

It is not a coincidence that Retail Sales and consumer confidence both made multi-month highs -- the readings are more than loosely linked. As consumers feel more confident about the economy and their personal prospects for the future, they're more likely to spend money on goods and services, which leads to an increase in consumer spending.

For the housing market, the ramifications are two-fold.

First, from the financing side, an expanding economy is linked to rising mortgage rates. This is because Wall Street tends to chase risk in a growth economy and the bond market offers little in the way of risk. As demand for bonds drops, then, mortgage rates rise throughout Georgia.

Second, rising consumer confidence can lead Canton home values higher, too.

Confident consumers are more likely than fearful ones to become home buyers. They're more likely to stop renting and start buying; more likely to list their home and "move-up" to something bigger; more likely to "take the next step".

So, as more buyers enter the market at a time when the national home supply is shrinking, the supply-demand balance in housing is shifting toward the sellers. This creates price pressures and should lead to higher home valuations in neighborhoods like BrookStone.

If you have plans to buy a home in 2012, the best time to buy may be now. Today's mortgage rates are low and so are the home prices -- a combination that's unlikely to last.

What's Ahead For Mortgage Rates This Week : February 13, 2012

Mortgage markets were mostly unchanged last week as Greece -- once again -- was front-of-mind for Wall Street investors. The nation-state is attempting to avoid a debt default, and has been attempting to avoid default since May 2010.

Early in the week, Greece reached a deal with European Union leaders to secure additional financial aid. By Friday, however, the deal was in doubt, as the EU leaders declared that the Greek Parliament would have pass new austerity measures before the aid would be released.

Austerity measures have been unpopular in Greece, giving rise to riots among citizens and resignations among politicians. Markets responded to the potential undoing of the debt deal by seeking safety in bonds -- including U.S. mortgage-backed bonds.

The Greek debt default story has helped fuel low mortgage rates in Georgia. Once a final deal is reached, mortgage rates are likely to rise.

For now, though, mortgage rates remain at all-time lows.

According to Freddie Mac's weekly mortgage rate survey, the average, conforming 30-year fixed mortgage rate held firm at 3.87% last week for mortgage borrowers willing to pay an accompanying 0.8 discount points plus applicable closing costs. 1 discount point is equal to one percent of your loan size.

For borrowers unwilling to pay discount points and/or closing costs, average mortgage rates are higher.

This week, data returns to the U.S. economic calendar.

Greece will still be in play, but the health of the U.S. economy will determine in which direction mortgage rates will go. There are two inflation reports due -- the Consumer Price Index and the Producer Price Index.

The former is a "cost of living" indicator for U.S. households; the latter measures the same for business. Inflation is bad for mortgage rates so if either report comes in unexpectedly high, mortgage rates are likely to rise.

The same is true for Tuesday's Retail Sales report.

Retail Sales account for close to 70% of total U.S. economic activity. An unexpectedly strong Retail Sales figure will suggest that the domestic economy is improving and that, too, would pressure mortgage rates up.

If you're shopping for a mortgage, or floating one with your lender, consider locking in this week. Mortgage rates don't have much room to fall and there's much room to rise.

What's Ahead For Mortgage Rates This Week : February 13, 2012

Mortgage markets were mostly unchanged last week as Greece -- once again -- was front-of-mind for Wall Street investors. The nation-state is attempting to avoid a debt default, and has been attempting to avoid default since May 2010.

Early in the week, Greece reached a deal with European Union leaders to secure additional financial aid. By Friday, however, the deal was in doubt, as the EU leaders declared that the Greek Parliament would have pass new austerity measures before the aid would be released.

Austerity measures have been unpopular in Greece, giving rise to riots among citizens and resignations among politicians. Markets responded to the potential undoing of the debt deal by seeking safety in bonds -- including U.S. mortgage-backed bonds.

The Greek debt default story has helped fuel low mortgage rates in Georgia. Once a final deal is reached, mortgage rates are likely to rise.

For now, though, mortgage rates remain at all-time lows.

According to Freddie Mac's weekly mortgage rate survey, the average, conforming 30-year fixed mortgage rate held firm at 3.87% last week for mortgage borrowers willing to pay an accompanying 0.8 discount points plus applicable closing costs. 1 discount point is equal to one percent of your loan size.

For borrowers unwilling to pay discount points and/or closing costs, average mortgage rates are higher.

This week, data returns to the U.S. economic calendar.

Greece will still be in play, but the health of the U.S. economy will determine in which direction mortgage rates will go. There are two inflation reports due -- the Consumer Price Index and the Producer Price Index.

The former is a "cost of living" indicator for U.S. households; the latter measures the same for business. Inflation is bad for mortgage rates so if either report comes in unexpectedly high, mortgage rates are likely to rise.

The same is true for Tuesday's Retail Sales report.

Retail Sales account for close to 70% of total U.S. economic activity. An unexpectedly strong Retail Sales figure will suggest that the domestic economy is improving and that, too, would pressure mortgage rates up.

If you're shopping for a mortgage, or floating one with your lender, consider locking in this week. Mortgage rates don't have much room to fall and there's much room to rise.

What's Ahead For Mortgage Rates This Week : October 16, 2011

Mortgage bonds suffered through another tough week last week as rising optimism that Eurozone leaders will "rescue" Greece plus stronger-than-expected economic data in the U.S. led bonds lower for the second straight week.

Conforming and FHA mortgage rates in Georgia moved sharply higher. After reaching an all-time low just two weeks ago, 30-year fixed mortgage rates are now at a 2-month high.

There were several big stories in the mortgage bond market last week. Each was bad for consumer mortgage rates.

The first big story was tied to Greece. As meetings continue between Eurozone leader and rhetoric heats up, it's becoming increasingly clear that Greece will receive its next wave of debtor aid. The planned rescue of Greece is undoing the safe haven buying that characterized the mid-summer financial markets. 

With investors more willing to take risks, mortgage bonds are selling off, and rates are rising.

The next big story was the release of the Federal Reserve's September meeting minutes. The central bank's meeting recap showed that the Fed considered additional stimulus beyond its Operation Twist, even as inflationary pressures are increasing. Because inflation lowers the value of outstanding mortgage bonds, rates climbed post-release.

Lastly, last week we learned that the U.S. consumer will not be deterred. Retail Sales grew 1.1 percent in September -- much more than Wall Street's expectation. This, too, caused a mortgage bond sell-off and led to a late-Friday surge in rates.

Markets should open worse this morning, pressuring rates higher yet again. However, there's plenty of data this week for which rate shoppers should be watching :

• Tuesday : Producer Price Index; Housing Market Index
• Wednesday : Consumer Price Index; Housing Starts
• Thursday : Existing Home Sales

In addition, there are 8 Fed speakers this week. Each can move markets.

Despite rising rates, mortgage rates remain low nationwide. If you've been shopping for a rate, it's not too late to lock in. Talk to your loan officer and make a plan to get locked, and get closed. 

Retail Sales Expected To Rise; Mortgage Rates Should Rise, Too

The American Consumer is alive and well, it seems.

Friday morning, the Census Bureau will release its Retail Sales figures for September. The report is expected to show an increase in gross receipts for the 15th straight month with analysts predicting a 0.6 percent increase from August.

The projected increase represents the largest jump in Retail Sales in six months and would likely lead mortgage rates higher for buyers in Marietta and   nationwide.

The connection between Retail Sales and mortgage rates is fairly straight-forward. Retail Sales are the majority component of "consumer spending" and consumer spending represents the majority of the U.S. economy -- up to 70 percent, by some estimates.

And, as the economy goes, so go mortgage rates.

10 months ago, mortgage rates shot forward to start the year. This is because expectations were high for a strong economic rebound. Conforming and FHA rates crossed 5 percent at the time and were headed toward six.

By mid-April, though, it was clear that economic data was falling short of predictions. As a result, mortgage rates declined, kicking off the 2011 Refi Boom. Then, by August, on ongoing economic softness, mortgage rates in Georgia fell further, making new all-time lows.

Expectations for a recovery have returned. Rates are now rising.

Last week's strong jobs report sparked hope for the U.S. economy and investors have been voting with their dollars. Mortgage rates are now up 7 consecutive days and Friday's Retail Sales report could cement the trend.

If you're shopping mortgage rates today, there's risk in "floating". You may want to lock your rate before Friday's Retail Sales report drives rates even higher.

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

Atlanta, GA Retail Sales Rise For 12th Straight Month In June

The American Consumer will not be deterred.
Despite worsening jobless figures and an increase in the Cost of Living, Retail Sales are climbing. In June, for the 12th straight month, retail receipts rose, excluding cars and auto parts.
Analysts expected no change from May. Instead, receipts topped $321 billion -- an all-time record.
For home buyers and would-be refinancers in Atlanta , this is a bit of unwelcome news. Mortgage rates are rising in the wake of the Retail Sales data release.
This is because Retail Sales account for roughly half of consumer spending, and nearly one-third of the economy overall. A rise in Retail Sales, therefore, suggests stronger growth ahead.
Here's how it happens.
As consumers spend more money, businesses sell more product. So, to accommodate burgeoning demand, business hire additional employees, and are forced to make additional capital expenditures as well.
This rise in spending prompts other businesses to hire and spend; to meet their own respective demand surges. There's a chain reaction-like effect.
Then, with businesses carrying larger payrolls and bigger staffs, federal, state and local governments realize bigger tax bases and can fund new and existing projects.
This, too, leads to hiring and the cycle repeats.
A weak economic outlook dragged down mortgage rates last week. This week's Retail Sales data reversed that flow. Mortgage rates are higher by 1/8 percent -- roughly $8 per $100,000 borrowed.
Retail Sales are up 8 percent from a year ago.

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 in Marietta and 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.

Report for Retail Sales Should Spell Higher Mortgage Rates For Wednesday

Georgia consumers  are  spending. And appears this maybe -- unwelcome news for today's home buyers.
Wednesday, the Census Bureau will release its March Retail Sales figures and the report is expected to show higher sales receipts for the 9th straight month. A strong reading like that should spell higher mortgage rates in Atlanta, Georgia and nationwide.
The connection between Retail Sales and mortgage rates is fairly tight. Retail Sales are "consumer spending" and consumer spending accounts for the majority of the U.S. economy. The U.S. economy, of course, is a dominant force in setting the direction in which mortgage rates are headed.
For example, in 2010, it was a weak economy and murky outlook that helped drive mortgage rates to all-time lows. Since last year, however, the jobs market has started its recovery, monthly receipts have returned to all-time highs, and the Federal Reserve is revising growth estimates for 2011.
Not surprisingly, mortgage rates have reversed, too.
As compared to 6 months ago, conforming rates are higher by 0.750%. Home affordability across Georgia is taking a hit. Plus, the stronger the economy appears to be, the more likely for mortgage rates to climb more.
It's why tomorrow's Retail Sales report is so important.
If you're under contract for a home in Georgia , or even evaluating the merits of a refinance, there's a lot of risk in "floating" your mortgage rate. The more prudent plan is to find a rate at which you're comfortable with the payment, and lock it in.
And you may want to take that lock sooner in Georgia than you had planned -- if only to protect your monthly payments. Once tomorrow's Retail Sales report hits, it may be too late. Especially if receipts rise for the 10th straight month.
The Retail Sales report is due for release at 8:30 AM ET.

Mortgage Rates Spike On Strong Retail Sales Data. Could 4 Percent Rates Be Done?

If consumer spending is a key to economic recovery, the nation is on its way.

Monday, the Census Bureau released national Retail Sales figures for October and, for the second straight month, the data surged past expectation. Last month's retail figures jumped 1.2 percent -- the largest monthly jump since March -- as total sales receipts climbed to a 2-year high.

Consumer confidence is rising, too. Though still below the long-term trend, confidence in the future up-ticked in October.

The current confidence reading is now double the low-point from February 2009.

It's no surprise that both Retail Sales and Consumer Confidence are higher. They correlate in a common-sense-type manner. When consumers are more confident in the economy, they're more likely to spend their money. This, in turn, leads to more purchases and rising retail receipts.

Unfortunately, for home buyers and rate shoppers in Atlanta , it also leads to rising mortgage rates.

Because consumer spending accounts for two-thirds of the economy, spending growth leads to economic growth. But it's been a lack of growth that's kept mortgage rates this low.

When the growth starts, the low rates end. It's why mortgage rates have added as much as 1/2 percent over the past 10 days. Consider the recent "good news":

• Retail Sales made a 2-year high in October
• Existing and New Home Sales showed big improvement in September
• Jobs growth returned in October

The days of 4 percent, 30-year fixed rate mortgages may be nearing its end.  If you're still floating a mortgage rate or thinking of buying or refinancing, consider the impact of rising rates on your budget.

The time to act may be sooner than you had planned.

What's Ahead For Mortgage Rates This Week : September 20, 2010

Mortgage markets were highly volatile, yet relatively unchanged last week in back-and-forth trading on Wall Street. Global investors are grappling with the state of U.S. economy and unable to discern whether it's growing, or slowing.

As an real-world illustration, the government's August Retail Sales report showed strong growth nationwide. However, in looking at a subset of that same data that accounted for rising gas prices, and excluded automotive-related sales, the results were far more tame.

In other words, despite the winning headlines, there was no clear conclusion in August's Retail Sales.

As another example, consumer confidence dropped to its lowest level since August 2009, it was reported last week. Now, on most days, this statistic would lead mortgage rates lower, but the figures happened to be offset by improving employment report that suggests a looming jobs recovery.

Again, markets got confused and without clear direction, mortgage rates have been dancing.

Last week, conforming rates carved out a range close to 0.375 percent, making it difficult for Georgia rate shoppers to zero-in on pricing. 30-year fixed rates worsened, 15-year fixed held steady, and ARMs improved overall.

This week, expect rates to be equally jumpy.  There's a lot of housing data due for release and the Federal Open Market Committee is meeting.

• Monday : Homebuilder Confidence Survey
• Tuesday : Housing Starts, Building Permits, FOMC Meeting
• Wednesday : FHFA Home Price Index
• Thursday : Existing Home Sales
• Friday : New Home Sales

That's one housing-related release per day, and a Federal Reserve meeting to boot. Today's low rates could be vanished by Friday. 

Therefore, if you haven't already, it may be time to call your loan officer for a refinance. Rates could certainly fall further, but they're looking more likely to rise.

Home Affordability Gets A Boost From Weak Back-to-School Retail Receipts

The recent rise in mortgage rates was slowed this week after the government released its Retail Sales report for August.

Prior to Tuesday, mortgage rates had been spiking across Georgia on the resurgent hope for U.S. economic recovery. The sentiment shift was rooted in reports including the Pending Home Sales Index and Initial Jobless Claims, both of which showed surprising strength last week.

August's Retail Sales, though, after removing motor vehicles, auto parts and gasoline sales, failed to maintain the momentum. Its figures were actually in-line with expectations -- it's just that expectations weren't all that high.

Wall Street now wonders whether the weak Back-to-School shopping season will trend forward into the holidays.

The doubt spells good news for mortgage rates and home affordability.

Because Retail Sales is tied to consumer spending and consumer spending accounts for two-thirds of the economy, a weak reading tends to drag down stock markets and pump up bonds, and when bonds are in demand, mortgage rates fall.

This is exactly what happened Tuesday. The soft Retail Sales data eased stock markets down, and generated new demand for mortgage bonds. This demand caused bond prices to rise, which, in turn, caused mortgage rates to fall.

Mortgage rates did not cut new lows this week, but they're very, very close.

With mortgage rates at historical lows, it's an excellent time to look at a refinance, or gauge what financing a new home would cost. Low rates like this can't last forever.

What's Ahead For Mortgage Rates This Week : September 13, 2010

A shift in Wall Street sentiment caused mortgage markets to worsen last week. There wasn't much in the way of new data, but the numbers that did hit the street helped quell fears of a double-dip recession.

Conforming mortgage rates rose between Monday-Friday for the first time since June, and mortgage-backed securities have now lost ground on six of the last 7 trading days. 

During this period, conforming mortgage rates in Georgia have risen by as much as 0.375 percent. 

Mortgage rates for FHA-insured home loans are higher, too.

Remember, concern for the future of the U.S. economy was a major catalyst for low rates this summer. The drop in rates, which began in April on weaker-than-expected data, accelerated through July and August on record-low home sales and a stalled jobs market.

Lately, though, these concerns are turning to hope.

• The July Pending Home Sales Index showed that housing has life
• Initial jobless claims came in much lower than expected
• Retail Sales is expected to post a gain for August

The growing optimism is putting the Refi Boom at risk. To be sure, it's been a rough two weeks to shop for a mortgage. 

This week may figure no better. In addition to the Retail Sales data, there's key inflation data due both Thursday and Friday, plus, two consumer confidence reports are set for release.  If the overall numbers point to an "improving economy", mortgage rates will likely rise again this week. 

Momentum is moving in that direction, certainly.

If your looking for the right time to lock a rate, now may be the time. Mortgage rates are off their best levels of all-time, but still quite low. There's lot of savings out there for homeowners who qualify.