Mortgage rates are tied to movements in the bond market which are subject to the dynamics of trading but at some level are dependent on broad based economic indicators or at least the interpretation of those factors.
Retail spending indicators have been positive through the buying season. Coremetrics reported year over year increases in online sales of 15.9% on Black Friday and 31.1% on Cyber Monday. Buyers seemed willing to go beyond essentials and pick up luxury and discretionary items as well. Jewelry sales, for example, leaped up 60.3%
Indicators like factory orders and consumer confidence have also been positive adding to a general investor sentiment that things are looking up. The stock market has responded with a 500 point climb in the DJIA since the beginning of the month.
Orders from factories for equipment have been steady this year but were better earlier in the year than later. The durable goods report expected this week will be one of the most important indicators of where the economy is going.
All of the good or at least moderately positive economic news stands in contrast to the important non-farm jobs report which showed anemic growth of jobs in November and a 0.2% increase in unemployment. Many feel that unemployment number is a more accurate indicator of the state of the economy than news about spending trends. Obviously spending will always be limited by employment.
So what does all of this have to do with mortgage rates? Real economic progress will probably translate into mortgage interest rates remaining at similar levels over the medium term. A weaker economy may or may not take rates down somewhat.
