We've said that strong job growth will be key to a successful 2012. Early signs are encouraging. Automatic Data Processing (ADP) reports that private payroll numbers surged 325,000 in December – more than double expectations for a 160,000 increase.

The news on jobs is definitely good, but it's important to keep expectations tempered. This time last year, ADP reported that private employment jobs increased by 297,000. That bullish number got more than a few economists and pundits thumping for a full-bore recovery. Unfortunately, job growth abated and practically stagnated through the summer months of 2011.

That said, we remain encouraged. The Bureau of Labor Statistics (BLS) reports that unemployment is, for the most part, dropping across the nation. The BLS's data show that 58 metropolitan areas reported jobless rates above 10 percent, but that's down from 112 a year earlier. Another 129 areas reported jobless rates below 7 percent, nearly double the 65 areas reported in November 2010.

So it appears employment is on the rise, which bodes well for improved home sales in 2012. Prices are another reason we should see more sales. Standard & Poor's data show current home prices when adjusted for inflation are at 2001 levels. In other words, homes are very affordable. When homes are very affordable, more homes will be sold and more markets will clear.

We've provided many examples of markets clearing over the past few months. Beleaguered Las Vegas is the latest example. DataQuick reports that home sales increased 11.2 percent year-over-year in November, with sales being driven by below-$200,000 homes. Prices are low in Las Vegas, to be sure, but the days of free-fall depreciation appear to have ended, with the median home price holding at $115,000 for three consecutive months.

Mortgage rates contribute to the affordability quotient. On that front, mortgages remain very affordable. In fact, over the past week the 30-year fixed-rate loan again touched a new low. This should come as no surprise when you see that the 10-year U.S. Treasury note also touched a new low, with its yield dipping below 1.9 percent.

Rates remain low thanks to the ongoing debt crisis in Europe , which continues to draw money to U.S. Treasury securities even though these securities don't yield enough to compensate for inflation. That's good news for borrowers, especially borrowers on the longer end of the spectrum – such as those seeking 30- or 15-year fixed-rate loans.

Is it worth waiting for even lower rates? We didn't expect to see sub 4-percent loans in 2011, so anything is possible. But you have to consider what's probable. With job growth accelerating and consumer confidence rising, it appears the economy is growing sufficiently to suggest any further rate drops will be measured in a few basis points.

At this point, it's really all about risk and reward. Today, the reward is very high, but we think the risk will likely rise with more evidence of improving economic growth.

Courtesy of Jessica Regan.

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