Federal Reserve Chairman Ben Bernanke has a thing for housing. Most of the Fed's monetary policies over the past three years have focused on re-igniting the housing market.

Whether through Fed policy or market forces, a flame has taken hold. The new home market is becoming a driving force behind economic growth. To that end, sales of new homes rose 5.7% in September to an annualized rate of 389,000 units. This latest increase puts the market back to March 2010 sales levels. Back then, sales were propped up by federal home-buyer tax credits.

Supply of new homes, at a mere 4.5 months, is tight. Tight supply, along with increased demand, has pushed the national median sales price up 11.7% year over year to $242,400. Couple increased demand with higher prices and we get more home construction down the road.

More construction is good news for the economy. Residential real estate investment has historically averaged 5% of GDP, while housing services have averaged between 12% and 13%, for a combined 17% to 18% of GDP. We're still not close to that level today. Despite the strong gains in new-home sales, 2012 will be the third or fourth lowest sales year since 1963. That means there is still a lot of upside potential in this market.

Current sales and construction trends point to a strong new-home market in 2013. The spill-over effect to the overall economy points to stronger economic growth.

Mortgage lending rates on all this new home construction, as well as on existing homes and refinances, continue to hold their multi-decade lows. More important, purchase applications have taken measurable strides forward in the past month.

We still don't see mortgage rates rising materially in the near future (and we don't see them falling materially lower either). For this, we can thank the Federal Reserve.

The Fed remains committed to buying $40 billion of mortgage-backed securities each month, which creates demand for mortgage loans on the secondary market. What's more, the Fed is committed to purchasing these securities in the same monthly amounts through 2013. The Mortgage Bankers Association (MBA) estimates the Fed will be purchasing nearly 50% of all mortgage originations by the end of next year.

The point we want to emphasis is that mortgage lending rates will have a tough time moving higher. Notice we say “tough,” not impossible. If the trend in new-home construction and sales continues, the economy will grow, and it could grow at a quicker pace than the Fed governors anticipate. Higher economic growth leads to higher interest rates.

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 don@donroth.com.