The government is out with a blockbuster report on hiring during November, showing that employers added a hefty 266,000 jobs to their payrolls — way, way better than anyone was expecting.
Meanwhile, the U.S. unemployment rate last month slid back to its lowest level in 50 years: a mere 3.5%. It had been 3.6% during October. And paychecks got bigger, as average hourly earnings were up 3.1% in November, compared to a year ago.
All of this is great news for workers and for Americans who are looking for a job. But it may not bode well for homebuyers and homeowners who are enjoying some of the lowest mortgage rates in years.
Signs point to higher mortgage rates
Friday's jobs announcement from the U.S. Bureau of Labor Statistics sparked a rally on Wall Street, as bullish investors felt much more confident about the economy and bought up stocks.
In the process, they sold off bonds — so bond prices tanked. And when that happens, interest rates rise — because bond prices and bond yields move in opposite directions. (That's just the way it works.)
The yield (interest rate) on the benchmark 10-year Treasury note took its biggest leap in months, which could mean higher mortgage rates. They tend to follow the track of the 10-year Treasury yield.
"For now, mortgage rates ... look likely to rise, possibly sharply," writes Peter Warden, editor of the blog The Mortgage Reports. "But, as always, events might overtake that forecast."
Take a look at today's best mortgage rates where you live.
Mortgage rates have been at their lowest levels seen in any December since 2012. Mortgage company Freddie Mac reported Thursday that 30-year fixed-rate mortgages are averaging 3.68%, down more than a full percentage point from a year ago, when they were at an average 4.75%.
Corey Burr, senior vice president with Sotheby's International Realty in Chevy Chase, Maryland, believes mortgage rates will remain low as long as the Federal Reserve holds interest rates down.
"Typically mortgage-backed rates take the lead from the Fed, so mortgage rates should stay very attractive until the Fed begins a regimen of rate increases," he says.
Federal Reserve policymakers have cut rates three times in recent months. They meet again next week but are widely expected to leave things alone this time.
But high employment should help home sales
Though rising mortgage rates may deter some homebuyers and cause some homeowners to decide against refinancing, a healthy job market is good for the housing market.
Obviously, you need to have a job and need to feel confident that you're going to keep it before you make that big step of taking out a mortgage.
"Buying real estate is as much about confidence in the future as it is about the current financial strength of a buyer, and Friday's strong jobs report adds to the confidence about the future," says Burr.
Sam Khater, the chief economist at Freddie Mac, said in a recent statement that robust employment is essential for home sales.
"Given low interest rates, modest inflation and a solid labor market, the U.S. housing market continues to stand firm, and, our forecast is for the housing market to maintain momentum over the next two years," Khater said.
Job growth was strongest last month in education, health services and manufacturing. More people were working in factories thanks to an agreement in late October that ended a strike at General Motors after almost six weeks.