Retail Sales (September 2008 - August 2010)If rates stay low, two things can happen.  One, you give your end buyers more opportunity to purchase a home.  Two, it takes away the urgency to buy now, because there is less fear of rising rates.  Buyers know we are headed toward winter, and that they are in the driver’s seat,  so price the home properly.  Properly doesn’t mean – “I might get this for it, so I’ll try for a few weeks.”  Properly means the lowest price compared to  similar homes, or the best home compared to similarly priced houses.

Here is what happened to slow the rise in interest rates for homeowners:

The recent rise in mortgage rates was slowed this week after the government released its Retail Sales report for August.

Prior to Tuesday, mortgage rates had been spiking across New Hampshire on the resurgent hope for U.S. economic recovery. The sentiment shift was rooted in reports including the Pending Home Sales Index and Initial Jobless Claims, both of which showed surprising strength last week.

August’s Retail Sales, though, after removing motor vehicles, auto parts and gasoline sales, failed to maintain the momentum. Its figures were actually in-line with expectations — it’s just that expectations weren’t all that high.

Wall Street now wonders whether the weak Back-to-School shopping season will trend forward into the holidays.

The doubt spells good news for mortgage rates and home affordability.

Because Retail Sales is tied to consumer spending and consumer spending accounts for two-thirds of the economy, a weak reading tends to drag down stock markets and pump up bonds, and when bonds are in demand, mortgage rates fall.

This is exactly what happened Tuesday. The soft Retail Sales data eased stock markets down, and generated new demand for mortgage bonds. This demand caused bond prices to rise, which, in turn, caused mortgage rates to fall.

Mortgage rates did not cut new lows this week, but they’re very, very close.

With mortgage rates at historical lows, it’s an excellent time to look at a refinance, or gauge what financing a new home would cost. Low rates like this can’t last forever.