Help on the way for home
Amid the gloom and doom facing the nation’s economy and the impact the pullback in consumer spending has had on retail, the occasional positive developments tend to be overshadowed. Clearly, the biggest of these is the dramatic reduction in energy prices, as a barrel of crude has fallen nearly $100 since a high this summer of $147. It also is worth noting that average rate on a 30-year fixed mortgage fell last week to 5.47%, which is the lowest level since the beginning of the year.
That is a positive sign for the housing market, as lower rates could help contribute to a restoration of normalcy between supply and demand and spark refinancing activity.
Both activities will help such retailers as Target, who are dependent on discretionary purchases of items in home-related categories for a large percentage of sales and profits.
Increased housing turnover means people need to buy furniture, change decor items and purchase such basics as shower curtains, rugs and small electrics. Refinancing to a reduced rate, along with the reduction in gas prices, increases the disposable income of price-sensitive customers.