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 in Phoenix 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 Arizona 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.

Pending Home Sales Index Points To A Budding Seller's Market

The Pending Home Sales Index surged 10 percent in October as low mortgage rates and low home prices spurred Scottsdale buyers into action.

A "pending home sale" is an existing home under contract to sell, but not yet closed. The Pending Home Sales Index is at its highest level since April 2010 -- the contract deadline date for this year's federal home buyer tax credit program.

The jump may also explain why home builder confidence is rising even as the number of new homes sold fades. Builders are seeing buyers' renewed interest in housing first-hand and expect the next 6 months to be dramatically better.

On a regional basis, gains in October's Pending Home Sales Index varied as compared to September. The Midwest led the charge, and the West was the laggard.

• Northeast Region: +19.6%
• Midwest Region : +27.3%
• South Region : +7.1%
• West Region : -0.4%

Home buyers looking in areas such as Dove Valley should take last month's Pending Home Sales Index to heart. According to the National Association of Realtors®, 80 percent of homes under contract close within 60 days, so we can reasonably expect November's and December's existing homes sales data to be similarly strong.

In other words, the housing market is heating up and may have already shifting toward sellers. Changes like that lower buyer leverage, and increase the cost of homeownership. Coupled with rising mortgage rates, the shift is even more defined.

The best time to buy a home this year may have already passed. The next best time may be right now.

Talk to your real estate agent if you're planning to buy a home in 2011. It may be smart to move up your time frame.

Jobs Data Shows Private Sector Growth, Hints At Lower Mortgage Rates

On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report from the month prior.  This month, though, because the first Friday of the month was also the first day of the month, the report was delayed one week.

The report hit the wires at 8:30 AM ET this morning.

More commonly called "the jobs report", the government's non-farm payrolls data influences stock and bond markets, and, in the process, swings a big stick with home affordability figures in Scottsdale and nationwide.

Especially in today's economic climate.

Although the recession has been deemed over, Wall Street remains unconvinced. Data fails to show the economy moving strongly in one direction or the other and, absent job creation, economists believe growth to be illusionary.

Consider:

1. With job creation comes more income, and more spending.
2. With more spending comes growth in business
3. With growth in business comes more job creation

And the cycle continues.

The prevailing thought is that, without jobs, consumer spending can't sustain and consumer spending accounts for two-thirds of the economy. No job growth, no economy recovery.

But there's another angle to the jobs report, too; one that connects to the housing market. As the jobs market recovers, today's renters are more likely to become tomorrow's homeowners, and today's homeowners are more likely to "move-up" to bigger homes. This means more competition for homes at all price points and, therefore, higher home values.

And that brings us to today's jobs data.

According to the government, 95,000 jobs were lost in September. Economists expected a net loss of 5,000.  However, if public sector jobs are excluded from the final figures, jobs grew by 64,000.  This is a positive for the private-sector, but still trailed expectations.

Wall Street is voting with its dollars right now and mortgage bonds are gaining, improving mortgage pricing.

So, although the September 2010 jobs report doesn't reflect well on the economy overall, home affordability in Arizona and around the country should improve as a result. 

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 Arizona 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.

25 Cities In Which To Get A Bang For Your Homebuying Buck

Home affordability is at an all-time high. Home values are still in recovery while mortgage rates continue to make new lows. But where are homes the most affordable?

CNNMoney.com recently ran a piece titled "Where Homes Are Affordable", listing 25 communities around the U.S. in which median incomes are relatively high and median homes are relatively low.  It's a housing market "bank for your buck" list.

The top 10 cities as listed by the editors:

1. Deerfield Beach, FL
2. Lafayette, IN
3. San Antonio, TX
4. Deltona, FL
5. Spring, TX
6. Glendale, AZ
7. Avondale, AZ
8. Bolingbrook, IL
9. Fishers, IN
10. Des Moines, IA

Of the top 10, 2 picks are from the Southeast; 4 are from the Midwest; and 4 are from the Southwest.  2 are "major" cities and the rest are suburbs of bigger cities.  Lafayette stands lone as a college town.

The rest of CNNMoney.com's 25 cities follow a similar pattern -- larger suburbs geographically concentrated in the Midwest and Southwest. Surprisingly, though, New Jersey and Virginia do find themselves represented.  Even the expensive Eastern Seaboard has its good buys.