Strangely Calm and Settled

The employment numbers for November were better than expected. Payrolls increased by 203,000 for the month, which handily beat the consensus estimate for 180,000. These new jobs helped drop the unemployment rate to 7.2% from 7.3%.

Last week, we mentioned that an unexpected spike in job growth would likely move mortgage rates higher. Interestingly, that wasn't the case:'s national survey held steady at 4.55% on the 30-year fixed-rate mortgage. Freddie Mac's survey shows that the rate on the 30-year loan actually declined four basis points to 4.42%.

Some credit-market analysts believe the mortgage-rate spike that occurred last week was a matter of market participants anticipating a strong employment report. That's plausible, given strong gross domestic product (GDP) growth, which also beat most economists' estimates.

More likely, though, uncertainty surrounding the federal budget kept investors in bonds, and, thus, kept mortgage rates under wraps. We say that because after a budget agreement was announced late Tuesday, mortgage rates moved discernibly higher.

This suggests economic growth will pressure mortgage rates going forward. By that, we mean growth will pressure rates to move higher. The meeting of Federal Reserve officials this coming Wednesday will provide further insight. The odds are rising that the Fed will initiate some level of tapering of its monthly Treasury and mortgage-bond purchases within the next couple months.

Frankly, when we look at the rebound in the yield on the 10-year Treasury note – a good proxy for the 30-year fixed-rate mortgage – we see a yield poised to move higher. And as the 10-year Treasury note goes, so, too, goes the rate on the 30-year loan.

But even if rates stand pat, costs on many mortgage products will rise beginning in 2014. The Federal Housing Finance Agency says Fannie Mae and Freddie Mac will increase the fee they charge lenders to guarantee mortgage loans. Of course, consumers don't directly pay for the fees, but lenders must recoup costs. So in the end, the consumer does pay.

Stricter rules on ability to pay also kick in. Stricter rules mean circumstances will arise where people who should get a mortgage won't. There are no free lunches: If costs aren't covered monetarily, they are covered through reduced opportunity.

That said, if rates don't stand pat, and we doubt they will, a 50-basis-point rise isn't out of the question. Many economists predict the rate on the 30-year loan will gradually work its way up to at least 5% by the end of 2014. We think that's a conservative estimate.

If we've said it once, we've said it a 100 times: risk in this market is in the waiting. Holding out for a meaningfully lower rate can potentially be very costly at this point. Courtesy of Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at