We've been warning over the past few months that accelerating job growth would lead to higher mortgage rates. That's exactly what's occurred.

Last Friday, the Commerce Department released its employment report, which showed 236,000 new jobs were created, topping most economists' estimates. The surge in job creation dropped the unemployment rate to 7.7% from 7.9%.

The rate of job growth frequently reflects the rate of economic growth. When economic growth accelerates, so does the demand for loanable funds. Interest rates, in turn, rise. But they rise not only because of increased demand, they rise also because economic growth stimulates inflation – a key component in interest rates.

We weren't surprised, then, to see the spike in mortgage rates – particularly in the 30-year fixed-rate loan – that occurred this past week after the release of the employment data.

Many lenders are concerned that rising rates will take the steam out of the housing recovery. We are more sanguine. As long as rising interest rates are accompanied by rising job growth, the impact will be minimal. Low rates have done their job, and employment and economic growth are the most important factors to maintaining the housing recovery at this point.

Rising rates will slow refinances, but we expect purchase activity to pick up the slack. More people working, and more people working at better-paying jobs, means more people will qualify for a loan. Just as important, they'll qualify for a higher-rate loan that they can still comfortably service.

In short, we don't see rising rates as an impending disaster.

The robust interest by investors in single-family homes will also help keep the housing market moving on a northeast trajectory. Low purchase prices and the potential for capital gains have pulled many real estate-minded investors into the market. We've mentioned in the past how large institutional investors have acquired large swaths of single-family homes.

That said, most people still prefer to own than to rent. Surveys compiled by the National Association of Home Builders (as well as other groups) find that most people overwhelming want to own a home. This shouldn't come as a surprise; neighborhoods of owners tend to be more stable and better-maintained than neighborhoods of renters.

We're not disparaging investors (or renters). In fact, they are doing the market a service. But over time, we expect more of these rental properties to transition to owner-occupied properties – and that's a good thing.

 Courtesy of Jessica Regan.

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