We pointed out here just yesterday that markets appear to be strengthening and this week would be packed with economic data giving us a reading on the current and future economic trends. TodayForeign Investors is another example of that progress as the Commerce Department reported that retail sales increased higher than expected 0.8% from the previous month. Analysts had predicted a number closer to 0.6%. In addition, the September retail sales number was revised higher, quite a bit higher actually, from 0.6% to 1.0%. That’s a healthy increase and the largest two-month reading in nearly three years.

 

While that’s certainly good news for equities it’s also a signal to bond holders that yields should continue to rise and we’ve more than likely put the ultra-low rate environment in the rear view mirror. No, the Fed didn’t raise rates at their November meetings earlier this month and it is appearing more and more likely there will be a Fed rate increase next month. However, don’t expect markets to follow suit and raise rates for borrowing across the board. Rates are rising now in anticipation of a Fed hike. Bond holders don’t like to be surprised and anticipate what the Fed will do and not react to it. They want to be ahead of the Fed curve.

That means both fixed and adjustable rates for real estate investors have been on a bit of a ride lately and don’t look to settle back to lows seen late last summer. For nearly an entire year, the FNMA 30-yr 3.0 mortgage bond traded in a very tight range, holding confirming fixed rates for real estate investors very near 3.25% throughout the year. Today at most banks, financing a 2-4 unit investor property is closer to 3.875% with 4.00% getting closer. The 15 year fixed for a 2-4 unit property is near 3.25%. For adjustable rate mortgages, the one-year Treasury constant maturity is around .72, which is one-quarter percent higher compared to a year ago.