Honey I’m Running to Walmart; Mortgage Rates Worsen

Honey I’m Running to Walmart; Mortgage Rates Worsen

Retail Sales (Feb 2009 - Jan 2011)

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 California and my clients in Pleasanton. This includes home buyers and would-be refinancers alike.

Consumer Spending

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.

The Spring home buying season is around the corner and if consumers keep heading to Walmart you may want to head to your lender to start your pre-approval instead. Send me a message below with some details of what your purchase or refinance goals may be. I am a licensed Mortgage Loan Originator at Vintage Mortgage Group in Pleasanton California. As a Mortgage Banker and Broker we have many options to match your goals.

You may want to take that next step sooner than you had planned — if only to protect your monthly payments.

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