The day after Thanksgiving is a busy shopping day nationwide and, this year, analysts are paying extra attention to sales figures.

Dubbed “Black Friday” in reference to red ink representing loss and black ink representing gain, today’s start to the Holiday Shopping season is believed to be the day that retailer balance sheets finally cross over to profitability.

But the accounting connotation of the phrase “Black Friday” wasn’t its original usage — it’s a media-coined term.

When the phrase was first used in Philadelphia in 1975, it was in reference to the day after Thanksgiving being the busiest shopping and traffic day of the year.

There’s other Black Friday trivia out there, too:

Did you know? Black Friday is neither the largest, nor the most profitable, shopping day of the year. Contrary to popular wisdom, it’s the 5th biggest, not the first. The two weekends before Christmas are usually the “biggest” series of days.

Did you know? In an attempt to spur the economy in 1939, President Franklin D. Roosevelt proposed to move Thanksgiving ahead by 7 days. 7 more days of shopping, he thought, would help retailers and help the economy. Eventually, the idea dubbed “Franksgiving” failed.

Did you know? To protect competitors from price matching “deals”, some retailers copyright their Black Friday advertising. Others won’t print prices at all.

Did you know? Last year, 14 percent of Black Friday shoppers had made a purchase prior to 4:00 A.M. with an average ticket of $347.

Black Friday is of special significance this year because consumer spending accounts for two-thirds of the U.S. economy. If Americans are shopping in full force, expect economic optimism and a mild rebound in the stock market. Unfortunately for home buyers, this should also lead mortgage rates higher.

By contrast, if sales figures are weak, expect talk of recession to grow.

Sources
Black Friday (Shopping)
Wikipedia
http://en.wikipedia.org/wiki/Black_Friday_%28shopping%29

Geek Trivia: Early bird special
Tech Republic
Jay Garmon, Nov 22, 2005
http://articles.techrepublic.com.com/5100-10878_11-5958978.html

Like everything else on Wall Street, mortgage markets are based on supply and demand. When demand outweighs supply, mortgage rates fall.

So, Tuesday, when the government unexpectedly announced a $500 billion budget for buying mortgage debt from Fannie Mae and Freddie Mac, the demand side of the mortgage market ballooned.

The surprise demand helped push mortgage rates to their lowest levels since January 22, 2008. 30-year fixed mortgage rates were down by as much as three-quarters of a percent Tuesday before retreating higher.

Not coincidentally, January 22, 2008, was the date of another unexpected government intervention — a surprise 0.750 percent Fed Funds Rate cut that was meant to spur the economy forward.

Interventions like these are a big reason why predicting mortgage rates is tough business — just when you discover the market’s balance point, an outside force shifts that balance, creating tremendous amounts of uncertainty about the future.

Uncertainty on Wall Street is typically bad for mortgage rate shoppers because it leads to high levels of volatility. Look at the trading pattern from Market Open to Market Close yesterday:

• 8:30 AM ET: Markets open with rates falling on the news
• 10:00 AM ET : Rates fall more on momentum trading
• 12:00 PM ET : Rates level at their lowest levels of the day
• 2:00 PM ET : Rates rise as profit-taking begins
• 3:30 PM ET : Rates rise more on momentum trading
• 4:00 PM ET : Markets close with rates down by half

Again, not coincidentally, this is the exact trading pattern from January 22, 2008. On that day, rates were at their lowest about 3 hours into trading, and then consistently rose all the way into Market Close — just like we saw Tuesday.

Unfortunately, in the 30 days that followed January 22, mortgage rates rose from a 3-year low to a 3-year high. And, it’s not to say that the same thing will happen from now through December 25, but trading patterns have a tendency to repeat themselves over time.

Mortgage markets seek balance and when there’s a dramatic shift, chaos can creates opportunity. Tuesday’s $500 billion pledge added new demand and shocked the mortgage market system. Before long, it recovered to find balance.

As of today, mortgage rates are still hovering near their 3-year lows so if you haven’t spoken to your loan officer about a refinance, consider calling today.

In real estate, the term existing home refers to a “used” property; one that can’t be classified as new construction.

The number of existing homes sold each month is tracked by the National Association of REALTORS. The report is often used as a gauge for the health of the real estate market nationwide.

In October, nearly 5 million existing homes sold across the U.S. This figure represents a slight drop from September’s reading, and a equally slight drop from the October 2007 data.

But, October’s Existing Home Sales figures marked the 14th straight month in which Existing Home Sales straddled 5-million units. This is a remarkable statistic because 14 months of anything is a pattern, not a blip. Despite what the news tells us, Americans are buying and selling real estate at a somewhat steady clip.

As we head into the Holiday Season, buyer activity should slow, reducing demand for homes. At the same time, however, widespread foreclosure moratoriums should reduce the number of homes available to buy. These forces should counter-act to help keep the market (and prices) in balance.

As the stock market retraced to its 1997 level, mortgage markets improved last week — but not by much.

Mortgage rates closed out the week slightly lower, but the week wasn’t without fireworks.

1. Calls of deflation grew louder
2. The automakers left Washington without a bailout
3. Citigroup’s stock price fell to the equivalent of its ATM fee

Separately, each of these elements would have created confusion on Wall Street. Together, they created near chaos. Stocks traded at a pace last week that has never been equaled.

As a result, mortgage rates were volatile, too.

Over the 5-day workweek, multiple mortgage lenders issued 11 distinct rate sheets, meaning that consumer mortgage rates changed every 3 hours, 38 minutes on average last week.

This is why home buyers should rate shop quickly. Wait too long and the mortgage rate is gone. And this week doesn’t figure to be any less volatile.

To start, it’s a holiday-shortened week. Fewer traders will be working as the week moves forward, making the Price Discovery process more difficult. With fewer active buyers and sellers, wild price swings are likely and mortgage rates should feel the impact.

Next, markets will debate the Citigroup Bailout, wondering whether this will (finally) mark the market bottom. It’s a conversation about which Wall Street never tires and with each bit of optimism, money should flow into stocks to the detriment of mortgage bonds and mortgage rates.

And lastly, there are 9 economic releases crammed into Monday, Tuesday, and Wednesday of this week, including two housing reports and an inflationary gauge behind which the Fed puts a lot of credence.

Signs of stabilization should buoy both stock markets and mortgage rates — Wall Street is craving balance of some sort to carry it into the New Year.

There are no Fed speakers scheduled for this week so watch for data and market sentiment to lead the markets. For rate shoppers, this means more rate sheets.

Business television and newspapers have made deflation a hot topic this week and, since Monday, Google has tracked 13,000 mentions of it.

Deflation is a recurring cycle in which the prices of goods and services fall. Isolated to one industry or sector, falling prices is the natural result of competition.

For example, when DVD players were first introduced, they were tagged at $800.

Today, you can buy them for less than $20.

Across many industries, however, and happening at the same time, falling prices can shut down the economy. Rather than buy things on the cheap, people stop buying anything at all. And why would they? The same items will cost less tomorrow.

And this is the problem with deflation — it halts consumer spending and consumer spending makes up two-thirds of the U.S. economy. When it stops, the economic result is dwindling corporate revenues which leads to:

1. Layoffs of the workforce, which leads to…
2. Less consumer spending, which leads to…
3. Dwindling corporate revenues, which leads to…

And the spiral continues.

Deflation can be much more insidious that its expansionary counterpart — inflation. Inflation is when the prices generally rise over time and it’s an economic condition through which governments can comfortably navigate. Deflation, on the other hand, is more rare and, therefore, fewer practical control measures exist.

Whether the U.S. economy will slip into deflation is a matter of debate.

The Fed has cut the Fed Funds Rate to promote economic growth and those changes can take up to 12 months to work their way through the economy. Deflationary pressures we’re seeing today, in other words, may have already been addressed and corrected by Ben Bernanke’s 10 rate cuts in the last 14 months.

Until the market figures it out, though, expect that each mention of deflation will hurt the stock market and help the bond market — including the mortgage-backed variety. This should help lower mortgage rates and make homes more affordable.