Mortgage markets were active last week,  seeing a lot of action spurred on by economic reports and government announcements related to mortgage borrowers.

Retail Sales Numbers Down  – Signaling a 10 Month Decline

From an economic news standpoint, the news was mixed. On the downside we received worse than expected Retail Sales Report numbers, which confirmed that folks are still holding tight to their purse strings.  While this news did not shock us entirely, it did signal the eighth decline in Retail Sales numbers over the past 10 months.

Unemployment Numbers Worse Than Expected

News from the employment side was also less than enthusiastic – to put it lightly.  Overall, unemployment claims were  worse than expected – which some have attributed to the massive Chrysler layoffs.  Still, the news was disappointing after there had been some recent signs of improvement in the labor markets.

US Manufacturing Sector Provides a Ray of Hope

The economic news from last week wasn’t all terrible, as we did receive some improved readings from the manufacturing sector – namely – the New York Empire State Manufacturing Index improved for the third month straight.

Consumer Sentiment Up – Always a Good Sign for the Economy

I’ve long preached here that Consumer Sentiment is one of the strongest and most telling indicators of where the economy is at any given moment.   That said, things appeared to be looking up in this category last week  – as we received the best consumer sentiment report we’ve had since September of 2008.

So although consumers aren’t ready to set out on a spending frenzy just yet, this report shows that most people are in fact starting to feel better about the US economic outlook, most likely due in part to the values of their investment accounts improving as Stock values move higher.

Inflation Levels Moved Higher

Drat, drat, and double drat.  I hate to see inflation numbers rise as this did last week.  All told, wholesale inflation levels moved up in April, driven by food price increases.

On the consumer inflation side, the Consumer Price Index (CPI) report was pretty much flat, although the Core CPI – which takes food and energy prices out of the equation – was a little hotter than expected, due largely to a massive spike in tobacco prices by a smoking 9.3%! (Sorry, the pun simply could NOT be avoided here.)

As you can see in the chart below, core inflation has been moving slightly higher since February.

Chart: Core Consumer Price Index

Remember, inflation is the Arch Rival of Bonds and home loan rates, so I will be keeping a close eye on this in the coming months.

A Big Fat Whoopsie-Daisy from HUD Added Some Excitement…

Love this one.  The Department of Housing and Urban Development’s Federal Housing Administration made a very interesting announcement that was ultimately deemed a case of premature exclamation.

The initial announcement was that HUD was going to allow first-time homebuyers to use the Federal tax credit of up to $8,000 to help cover downpayment and closing costs, instead of making buyers wait to receive this benefit after the fact at tax time.

However, HUD never released any specific details about how this program would work, and they actually pulled some of the industry announcements as realized the need to regroup to provide more details. (Hence, the Whoopsie-Daisy!)

Of course, we’re still excited about the potential of this new HUD program, as it could be great news for first-time homebuyers, who are slated to account for 53% of home purchases in 2009. When the details of the program are fully released, I will certainly keep you posted as I learn more.

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