Although the low rates and home affordability we have been experiencing recently are positive steps in the right direction, the most important factor for a housing market recovery is job creation.

Jobs are the key ingredient for housing in two ways, the first – they boost demand and they limit supply.  Without steady job growth it is tough to convince people to buy a home when they are uncertain about their next paycheck.  Employment has continued to trend up since the start of 2011; nonfarm payroll employment increased by 216,000 in March, lowering the unemployment rate to 8.8%.  The second reason jobs are so important is that without them more homeowners will fall behind on their loan payments and could lose their homes to foreclosure.  With jobs more homeowners are able to stay current or catch up on missed mortgage payments.

So what does this mean for rates?  As unemployment continues to recover, I see the average rate for a 30-year fixed mortgage heading up to around 6%.  I say this because historically 6% is where rates have sat when our economy is experiencing a normal mode of growth.  That’s where rates were before this recession and they dropped to historic lows because of economic stress.  A jobs recovery is great economic news, but it also means it’s time to start keeping an eye on rates if you’re in the market.

In my next blog I will discuss the importance of the different loan features and products we offer, especially the 30-year mortgage, and how essential it is to our housing finance system as a whole.