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Chilly Retail Sales Ready While Rates Remain Hot


In this Issue:

Last Week in Review: Retail sales plummeted, inflation remains tame, and home loan rates are hovering near record lows. 

Forecast for this Week: It's a holiday-shortened week, with housing reports dominating the headlines.

Last Week in Review:

Shop or drop. Fewer people than expected opened their wallets in December, as the latest Retail Sales numbers declined. But with home loan rates hovering near historic lows, not all of last week's headlines were disappointing.

Retail Sales plunged by 0.9 percent in December, the biggest decline in nearly a year as lower gas prices didn't have the desired impact on consumer spending during the busy shopping season. November's numbers were also revised lower. This news was a bit of a surprise, and not the best sign for our overall economic recovery. But one number doesn't make a trend, so this will be an important report to watch in the coming months.

On the inflation front, inflation at the wholesale level remained tamed in December while the Consumer Price Index showed its smallest gain in five years, mainly due to plunging oil prices. We are beginning to see disinflationary pressures, which is a slower rate of inflation over a shorter time period. While low inflation is Bond-friendly news (and also good for home loan rates, since they are tied to Mortgage Bonds), outright deflation is a sustained fall in prices. That is something we do not want to see because deflation also brings increased unemployment. Inflation is another key item to monitor as we move ahead into 2015.

Also of note, the World Bank cut its forecast for global growth, warning that the world economy remains overly reliant on the "single engine" of the U.S. recovery. If negative news from overseas continues, we could see safe haven trading into our Bond market, helping Mortgage Bonds and home loan rates in the process.

The bottom line is that home loan rates remain near historic lows, and now is a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.

Forecast for this Week:

The markets are closed Monday in observance of Martin Luther King Jr. Day. Then, housing reports are front and center the rest of the week.

* On Tuesday, the National Association of Home Builders Housing Market Index for January will be released.

* More housing numbers from December follow. Look for Housing Starts and Building Permits on Wednesday, and Existing Home Sales on Friday.

* Weekly Initial Jobless Claims will be delivered on Thursday, as usual.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

When you see these Bond prices moving higher, it means home loan rates are improving—and when they are moving lower, home loan rates are getting worse.


By: Michael Borodinsky

Vice President/Regional Builder Branch Manager | Caliber Home Loans

Call Michael: 732-382-2654

Email Michael:



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