The Obama Administration’s plan to refinance all “responsible” homeowners is more about transferring money from long term savers (pension funds and the elderly) to spenders (cash strapped homeowners) in order to boost consumption numbers like Retail Sales than it is about anything else.
The report on retail sales in April will be released Tuesday, May 15. Retail sales figures have continued gains in the previous months. Increased consumer sentiment and recent announcements from the Obama Administration will likely positively affect the upcoming report.
In March, retail sales rose 0.8 percent, following an increase in February of 0.9 percent. Reports of healthy retail sales correspond to the spring buying season as well as the highest consumer sentiment levels since the 2008 financial crisis; the Thomas Reuters/University of Michigan Index rose to a score of 77.8 this month. Jobless claims have also been down in past weeks, to 367,000 state unemployment claims last week according to the U.S. Labor Department.
The Administration’s recent announcement to expand government-sponsored borrower mortgage relief efforts and legislative traction may also free up more monthly income for American homeowners to spend. Bills introduced by Senators Feinstein, Menendez, Boxer and Merkley include provisions for non-GSEs borrowers to refinance, GSE covered closing costs for refinances, and an elimination of LTV requirements under HARP. HUD Secretary Shaun Donovan supported the bills as critical steps to support the President’s refinance initiative. This movement to expand HARP 2.0 will transfer wealth from individual and organizations that have long term savings strategies to mortgage-holders, who may be more likely to spend their savings, which the Administration estimates will be approximately $250 per consumer per month.