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 , 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 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.

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 Hayward , 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.

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 California 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.