In a holiday-shortened week with no major economic data releases, expect worries about the credit markets and speculation about holiday shopping to take center stage.

Last week was a mixed bag for the economy and mortgage markets responded in kind.  Rates were relatively unchanged.

The news started with Wednesday’s Retail Sales report.  In showing a modest increase, the ongoing fears of a consumer spending decline were allayed. 

This is good news for the economy as a whole because consumer spending accounts for roughly two-thirds of the U.S. economy — even a small dip could push a precariously balanced economy into recession.

Unfortunately, this could be bad news for rate shoppers as individuals — a slowing economy could drag down mortgage rates with it.  And, with six weeks remaining in the Shopping Season, the American Consumer appears to want its presents.

Also making news last week:

  1. CPI data showed that the Cost of Living increased 2.2% in the past year
  2. Oil prices fell from its all-time high, reducing inflationary pressure on the economy
  3. Gas prices fell nationally, shedding 3 cents per gallon according to

This week, expect mortgage rates volatility as we get closer to Thanksgiving; fewer traders will be participating.  With fewer buyers and sellers, it’s harder to find “the right price” for mortgage bonds. 

This same economic phenomenon may explain why it’s easier to buy or sell a home in the Spring than in the Winter — more market participants makes it easier to find a match.

Most important release of the week: Wednesday’s University of Michigan Consumer Sentiment survey.  If it comes in strong, expect positive reaction in stock markets which will, in turn, drag down mortgage bonds and push rates higher.


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