How The Right Amount Of Economic Weakness Can Help A Home Buyer
After a weak holiday shopping season, annual retail sales declined in 2008.
It marks the first annual Retail Sales decline since the government started tracking the data 40 years ago.
It also gives credence to the notion that the U.S. economy is suffering through a deeper recession that previously thought. A pullback in spending — especially during the shopping-heavy month of December — highlights the cautious nature of today’s American shoppers.
And in a strange sort of way, all of this may end up being good news for spring home buyers.
Because Retail Sales are reflective of consumer spending, a dramatic pullback helps to keep the economy in slow gear, countering the inflationary impact of government stimulus and direct intervention. Inflation, you’ll remember, causes mortgage rates to rise. Its absence, therefore, helps to keep mortgage rates low.
In addition, it’s earnings season on Wall Street and weak corporate guidance has spurred a 6-day decline in the Dow Jones Industrial Average. As dollars leave the stock market, investors are parking them in the safer world of bonds. This includes mortgage bonds, of course, which further pressures rates lower.
As we’re seeing, economic weakness — to a point — can be the friend of a person in need of a new home loan. For active home buyers or people entering the market this spring, therefore, the timing may be just right.
(Image courtesy: The Wall Street Journal Online)