Well, it's not all bad news

Nowadays, even the little economic good news that arrives is likely to come with a bitter dose of bad.

On the upside for many consumers Wednesday, mortgage rates fell to a record low and oil prices fell yet again.

Then there was a grim retort.

Holiday retail sales were disappointing and filings for unemployment benefits hit a 26-year high last week.

Here's a look at the latest developments.

Mortgages fall

Rates on 30-year fixed-rate mortgages fell to a record low for the second straight week, causing refinancing applications to surge to the highest level in more than five years, a month after the Federal Reserve pledged to channel billions to prop up the sinking U.S. housing market.

While homeowners around the country are taking advantage of historically low rates to refinance their loans, the opportunity isn't available to those with poor credit or little equity in their homes, and foreclosures are still likely to surge.

Freddie Mac, the mortgage company, reported Wednesday that average rates on 30-year fixed-rate mortgages dropped to 5.14 percent this week, down from 5.19 percent last week. The rate was the lowest since Freddie Mac's weekly mortgage rate survey began in April 1971 and the eighth straight week of declines.

At Signature Home Funding in Winter Haven, traffic nearly doubled last week from the previous week as borrowers moved to refinance into the lower rates, said mortgage broker Kevin Sandridge.

He noted he was quoting clients a rate as low as 5.87 percent for a 30-year, fixed mortgage, including fees.

To qualify, however, borrowers generally must have a FICO score of at least 600, he said.

Meanwhile, the Mortgage Bankers Association said Wednesday its application index surged 48 percent in the week ended Dec. 19 to 1245.5. Total applications and refinance activity were at their highest levels since July 2003, when refinancing boomed at the peak of the housing market.

With 2008 home sales falling to the lowest point in at least 10 years, housing industry lobbyists are pressing in Washington for further aid to the housing market. Homebuilders want tax credits of up to $22,000 for home purchases and subsidies that would bring mortgage rates to as low as 3 percent for the first half of next year.

Retail sales drag

After limping through a holiday season expected to be the worst in decades, the nation's stores made it to Christmas with little to celebrate.

For many merchants, the winter and beyond are likely to get even bleaker, because Americans are too worried about their jobs and the recession to do much shopping.

Over the past year, shoppers have drastically changed their spending habits in ways not seen since the 1970s, switching to store brands and discounters like Wal-Mart. During the holiday shopping season, they cut back on their spending, took advantage of big discounts and bought practical gifts.

The retail industry could be looking at its biggest contraction in 35 years, according to Burt P. Flickinger, III, managing director of consulting firm Strategic Resource Group. He estimates that 160,000 stores will have closed in 2008 and predicts that an additional 200,000 will shutter next year. In March and April of 2009, Flickinger expects 2,000 to 3,000 malls to shutter.

In Christmases past, stores could rely on a surge before or after the holiday to help save the season. But this year, it was virtually over before it began as stores had to slash prices on holiday goods as soon as they hit the shelves.

Consumer spending fell for a fifth straight month in November, government data showed Wednesday, the longest weak stretch in half a century, while incomes fell and layoffs mounted.

A full picture of the holiday season will not be known until Jan. 8, when major retailers report their sales figures.

Unemployment up

The number of people filing for unemployment benefits hit a 26-year high last week, as more employers to cut jobs.

First-time claims for unemployment rose 5.4 percent, to 586,000 for the week ending Dec. 20, the Labor Department reported Wednesday morning. The last time claims were that high was Nov. 27, 1982. The four-week moving average, which is a less volatile indicator, rose to 558,000 from 544,250, also a 26-year high.

Oil prices sinking

Crude prices tumbled Wednesday and growing stockpiles of unused gasoline suggested demand has continued to erode.

Light, sweet crude for February delivery fell $3.63 to settle at $35.35 in a shortened day of trading. It was the ninth straight day that crude has fallen.

Investors expecting more evidence of slowing U.S. energy demand got a bit of a surprise as the Energy Department reported crude inventories dropped last week.

But Americans continue to cut back on driving, leading to growing stockpiles of gasoline and eroding demand for motor fuel.

Gasoline futures plummeted below 80 cents a gallon.

"I don't see anything out of this report that's really going to change this downward move," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "Things are going to remain under downside pressure through the balance of this year and probably into the new year."

At the pump, retail gas prices fell less than a penny overnight to a new national average of $1.655 a gallon Wednesday, and remain well below the year-ago average of $2.972 a gallon, according to AAA and the Oil Price Information Service.

Information from the Washington Post and Associated Press was used in this report.

Other reports

Orders for durable goods, such as appliances and televisions, dropped 1 percent to 186.9-billion, the U.S. Census Bureau said Wednesday. It was the fourth consecutive monthly drop but a much smaller decline than the 8.4 drop in October, thanks largely to orders for defense-related goods.

Prices fell 1.1 percent last month, the Commerce Department reported Wednesday. Much of that was due to falling gasoline and food prices. When food and energy are excluded, prices were actually flat.

Well, it's not all bad news 12/24/08 [Last modified: Friday, December 26, 2008 8:47pm]

    

Join the discussion: Click to view comments, add yours

Loading...