Mortgage Market Guide: Retails Sales Slip, Consumer Inflation Pops

Last Week in Review: Retail Sales slip in August, while consumer inflation pops.

Forecast for the Week: Although housing data dominates, all eyes will be on the Fed.

View: Don’t get scammed out of your iTunes gift card.

“My mama told me, ‘You better shop around.'” The Miracles. Clearly that message wasn’t heard among consumers. Back-to-school shopping didn’t help overall Retail Sales make the grade in August. The increasing cost of goods might be to blame.

Consumers spent less on a variety of goods, including autos, in August. This could signal a slowdown here in the U.S., especially since August is a big month for back-to-school sales and consumer spending is what drives our economy. The Commerce Department reported that Retail Sales in August fell 0.3 percent, below the -0.1 percent expected.

Retail Sales have now slowed for two straight months. This likely means that the Federal Reserve will not raise the short-term Fed Funds Rate at the next Federal Open Market Committee meeting Sept. 20-21. The Fed Funds Rate is the rate at which banks lend money to each other overnight.

This exercise in frugality might be a reaction to increasing costs on the consumer side. While the Producer Price Index showed that wholesale inflation remained tame, the Consumer Price Index (CPI) increased 0.2 percent in August, the U.S. Bureau of Labor Statistics reported.

Core CPI, which strips out volatile food and energy, increased 0.3 percent in August, the largest increase since February. Core CPI has now risen 2.3 percent in the 12 months ending in August. This is important to note because inflation reduces the value of fixed investments, like Mortgage Bonds. Since home loan rates are tied to Mortgage Bonds, further signs of inflation are something to watch for, as both Mortgage Bonds and home loan rates could worsen if inflation heats up.

For now, home loan rates are still holding strong in historically low territory, providing great opportunities for purchases and refinances.

If you have any questions about home loans or rates, please contact me today.

Housing data dominates, but the Federal Open Market Committee (FOMC) will garner much of the attention.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.

When you see these Bond prices moving higher, it means home loan rates are improving. When Bond prices are moving lower, home loan rates are getting worse.

To go one step further, a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes are on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Mortgage Bonds have tried to make up for some lost ground recently; however, home loan rates remain in historically low territory.

Phone Scams Target Apple iTunes Gift Cards
Victims are beings conned into giving out the 16-digit codes on the backs of cards.
By Bob Niedt, Kiplinger.comWhile Apple fans line up to get their hands on the new iPhone 7, scammers are lining up to steal your iTunes gift cards.

The popular gift cards are sold everywhere, from convenience stores and supermarkets to warehouse clubs and websites. I buy my iTunes gift cards at a discount at Costco. A four-pack of $25 gift cards sells for about $84, 16% below face value. I immediately take them home, scratch off the numeric shield that hides a card’s 16-digit code, and transfer the value to my iTunes account. Whenever I make digital purchases at iTunes, iBooks, Apple Music or Apple’s App Store, the amount is deducted from my account.

It turns out con artists are fans of iTunes gift cards, too.

Apple, the Federal Trade Commission and the Internal Revenue Service are warning consumers to hang up on callers demanding immediate payment of fictitious debts using iTunes gift cards. The scammers spin a variety of tales about back taxes, overdue utility bills, or relatives in trouble to trick you into running out to buy gift cards and then divulging the 16-digit codes over the phone.

Here’s the bottom line from Apple: You should never use iTunes gift cards to make payments for anything other than membership to and products from iTunes, iBooks, Apple Music and Apple’s App Store. If you hand over the card codes, the scammers will use them to buy Apple products for themselves or sell the codes on the black market. Either way, your money is gone forever.

In the latest twist on this con, the IRS says sophisticated scammers are even using robo-callers to play automated messages that threaten victims with legal action if they don’t call back to settle bogus debts with gift cards. According to the IRS, demand for payment with a gift card is a clear sign of a scam. Further, the IRS always contacts taxpayers by mail about unpaid taxes, and its agents will never demand immediate payment over the phone.

In addition to iTunes gift cards, the FTC says other payment methods that con artists are asking for include Amazon gift cards, PayPal, and reloadable cards including MoneyPak, Reloadit and Vanilla. Scammers also might request that money be wired via Western Union or MoneyGram. The FTC says legitimate government officials do not demand payments by these methods.

If you receive a phone call insisting on payment by iTunes gift card (or something similar), hang up. I take the extra step of blocking that number in my iPhone contacts. If the caller claimed to be with the IRS, file a report on the IRS Impersonation Scam Reporting web page. You can also file scam reports on the FTC Complaint Assistant web page.