Retail Sales & Mortgage Applications Tenuously Move U.S. Economy Ahead
by Hiland Doolittle
The bulls are running strong in U.S. equity markets. Inspired by stronger than expected Retail Sales, equity markets jumped on the rising consumer confidence bandwagon and took dead aim at the 12,000 DOW Jones barrier. Thursday’s close was the highest of the year and highest since the recession hit its peak.
Spectacular earnings by Ann Taylor and a nice turnaround from Nordstrom led the retail charge. Ann Taylor is up 800 percent since 2008 lows.
Friday’s Commerce Department report indicated across the board consumer spending increases. Total retail sales increased by 0.3 percent and sent signals that the recovery just might be stronger than expected. Aided by the $15 billion jobs legislation, an increase in hours worked per week and signs that small business is looking to add jobs have contributed to a rise in consumer confidence and spending.
Sales were 3.9 percent higher than February 2009. Analysts had predicted a 0.2 percent February decrease. January sales were adjusted downward. Originally reported as a 0.5 percent gain, the actual gain was a modest 0.1 percent. In any case, already low retail inventories are now challenged to expand.
Had a deep decline in auto part sales not occurred in February, the retail spending gain would have been 0.8 percent. Core retail sales, which do not include autos, building materials or gasoline were up 0.9 percent on top of a 0.6 percent gain in January.
On Wall Street, there is some concern that these improved signals may encourage the Federal Reserve to implement a slight rate hike in their meetings next week. The Fed maintains that rates will remain at record lows until employment shows stronger signs of recovery.
What may be most encouraging from this report is the hint that the American consumer is once again preparing to carry the spending ball. The government is desperately seeking relief from carrying the economy through various stimulus programs. Politics aside, the American consumer is a valued global commodity.
Mortgage Applications Up – Foreclosures Slowed
Mortgage applications jumped a startling 9 percent last week and Realty Trac reports that foreclosure activity slowed in February, yet still remains elevated from a year ago. A recent burst of warm air has brought spring buying-type activity to the northeast, as heavy snowfalls have winter-bound buyers looking for fresh residences.
Many of the sales are low-end, where inventory is rapidly depleting. Thirty year fixed mortgage interest rates are still below 5 percent. Combining this positive factor with sharp price reductions has led to a healthy purchasing environment.
Basically buyers are looking at a market that offers:
- Low prices
- Low interest rates
- Government incentives for buyers
- Sellers willing to negotiate
40 percent of January buyers were first-time buyers as compared to 43 percent in December and 50 percent in November.
On the troubling foreclosure scene, indications are that the heavy weather, which closed many courthouses during the month, may have contributed to the foreclosure notice slowdown. Still, 308,524 new foreclosure notices were initiated in February. Across the country, one in every 418 homes received a foreclosure notice in February.
Nevada, Arizona, Florida and California lead the union in foreclosures. Adding to the problem is the increasing trend for homeowners who owe more than the value of their house to walk away from the property. Many of these property owners are employed and current with their payments, but are unwilling to pour good money after bad. The real estate crisis is far from over and will deepen when the government ceases acquiring distressed assets in March.
Tags: Consumer Confidence, housing, interest rates, Retail Sales, Stimulus Plan, unemployment, US Retail Sales
About the Author - Hiland Doolittle
Hiland is a professional writer with extensive entrepreneurial experience. He is a graduate of St. George’s School Newport, RI and the State University of New York at Albany where he majored in history. He has been active in the real estate business for 30 years and has founded and sold several businesses.
Hiland currently writes for several financial sites and is a published author of the novel The Last Parade. He has recently completed a manuscript for a children’s book entitled Sami and The Minnow Man.
