In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses mortgage purchase applications and retail sales.

• A notably higher number of people submitted mortgage applications for home purchases in the past week.  A big weekly gain of 13 percent (after adjusting for the usual seasonal factors) looks to show a breakout from the low levels of the past two years.  Prior to today’s data this mortgage data was suspect because it did not match up with the recovery in home sales figures.  But now, the mortgage data is clearly pointing to rising home sales.  Let’s hope that cash deals, which are not in the mortgage data, are not falling just as mortgage activity is beginning to show a marked improvement.
• Refinancing activity also rose as mortgage rates continue to remain at incredibly low levels (partly thanks to the Euro crisis), with each refinancing probably lowering a mortgage bill by $150 to $300 each month.
• In separate economic news, retail sales retreated, possibly signaling a decelerating economy.  But one big part of the decline was due to people not having to fork over so much at gas stations as the prices at the pump fell.  Sales at furniture and home furnishing stores continue to show consistent recovery, rising 9 percent from one year ago, no doubt helped by rising home sales.  Sales at men’s clothing stores rose in May while sales at women’s clothing stores fell.  Still, parents with teenage daughters need to be mindful that sales are about five times higher at women’s stores compared to men’s.
• Finally, a plunge in producer prices suggests broadly retreating inflation.  It costs 8 percent less compared to last year to buy crude producer items and 0.5 percent less to buy products at intermediate stages of production.  However, consumer price data, which comes out tomorrow, will not show a comparable retreat simply because the biggest weight to consumer prices is the rent component and this has been rising because of tightening apartment vacancy trends.  Therefore, next year’s cost of living adjustment on social security checks, for instance, will be around 2 to 3 percent.