By Lou Barnes Inman NewsÂ

Mortgage rates are a hair lower, with the lowest-fee, 30-year stuff approaching 6.75 percent, taken by the 10-year T-note’s decline to 5.05 percent.Â

Why the 10-year has fallen toward the bottom of the four-month, 5-5.25 percent band is a matter of sorting dogs that bite from ones that merely bark. Ditto for measuring the odds of falling out of the bottom of that band.Â

The 21st century is only five years old, but this week has brought another in an already long list of new-century lessons on the difference between the effective use of force and counter-productive use, whether in the name of self-defense, redress of grievance, or moral imperative.Â

Events in and near Palestine this week do present a low-order risk of wider conflict and a threat to oil supplies. However, this latest spasm of righteous retribution among peoples who hate each other but are chained together has had little effect on financial markets, and instead produced widespread disgust at all parties involved — even Arab condemnation of Syria as Hezbollah accelerant.Â

As the news has arrived, first from Gaza, now Lebanon, oil prices have moved, but the three bucks from $74 to $77 is hardly a panic, and has alternate explanation. There has been no news-synchronized flight of cash to Treasurys for safety. The stock market is having an awful time, now testing multi-year lows, but has reasons far from the Middle East to do so (the Middle East does make good cover, though).Â

The bond market has been moving lower in yield in the two weeks since the Fed’s last meeting on a consistent string of reports of a slowing economy, and rising oil prices. The pattern: the consumer is showing signs of long-expected exhaustion.Â

Today we learned that retail sales failed to grow for the third month in a row, down 0.1 percent versus expectations of a gain. Makes sense, as the employment cost index (tipped upside down, a good measure of income from employment) has gained only 2.6 percent in the last year, the lowest gain on record, versus much higher energy and interest costs and the gradual evaporation of the wealth effect from home prices.Â

The energy picture is disturbing. A global-security spike in oil prices would soon reverse; and, unfortunately, that’s not what this is. American gasoline consumption is running at the same level as last year, and we are competing with some hefty buyers. China’s oil imports surged 15 percent in the first 90 days of 2006, double the forecast, but consistent with an economy growing almost 10 percent per year, and the dawn of affluence is disproportionately increasing appetites for energy (cars!).Â

Confounding everyone from those who would limit fossil-fuel use to prevent climate change to central bankers who would limit inflation, global energy demand continues to grow, firmly linked to GDP growth. Yes, we are more efficient, but as global GDP grows, oil demand grows faster than efficiency. US total consumption of gasoline has been the same since 1984, 55-65 million gallons per day. Automobiles are much more efficient, but there are a hell of a lot more of them, more every day.Â

Some in the bond market think this latest rise in oil prices will be the coup de grace for consumers, while others think the inflation hazard will force the Fed to hike one or more times, which in turn will put the final kibosh on consumers. It doesn’t matter which: kibosh is kibosh.Â

Stock market types are blaming oil, the Middle East, and North Korea for their evident distress, when a softening economy is a simpler explanation. Bonds have improved tick-for-tick on the stock market sell-off.Â

The Fed is at 5.25 percent, and the entire Treasury curve is farther below the Fed than last week. In the seven similar circumstances in the last 40 years, a recession ensued six times, and the one miss was due to a rapid retreat by the Fed.Â

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.

After three months of declines, the pace of housing construction — measured by the number of new housing starts — rose 5% in May to a 1.957 million-unit annual pace, the Commerce Department reported June 20. (Economists had expected May housing starts to stabilize at a 1.85 million-unit pace.) Permits for future groundbreaking, an indicator of builder confidence, fell by 2.1% to a 1.932 million-unit pace in May, the lowest since November 2003 and the first time since January that total housing permits fell below starts.

A property survey is a map of a property showing where structures, servitudes, easements and boundaries are located. To most buyers, being required by the mortgage company to have an updated survey for closing just seems like a waste of money. And, who wants to spend more money than absolutely necessary?