The U.S. economy accelerated in the third quarter, signaling yet again that the nation's economy is surging ahead thanks to steady spending from businesses and consumers.

During the period that runs from July to September, gross domestic product increased 3 percent in spite of the storms that ravaged Florida and Texas in early fall, and slowed spending in these major commercial centers.

The uptick marks the economy's most robust six-month stretch since mid-2014, according to the Wall Street Journal.

The news comes on the heels of strong economic growth in the second quarter, when GDP increased 3 percent, undergirded by increased consumer spending and business investment.

President Donald Trump has set a goal of 3-percent long-term GDP growth as a mainstay of his plan to create more jobs. During an August speech in Missouri, he said, "If we achieve sustained 3 percent growth that means 12 million new jobs and $10 trillion of new economic activity. I happen to be one that thinks we can go much higher than 3 percent. There's no reason we shouldn't."

If recent job gains have taught us anything it's that Trump's promises of tax reform and deregulation have renewed confidence among business owners, who are hiring more and have upped their spending on equipment and other resources. Along with consumer spending, ongoing business investment goes a long way in keeping the economy churning.

Why GDP matters

Of all the reports and data we explore each week, none is more suited to give us a full picture of the economy's performance like the gross domestic product, or GDP.

GDP is simply the total of goods and services produced within a country during a specific time period. It measures an economy's size, and gives policymakers and central bankers insight into whether the economy is contracting or expanding, whether interest rates need to be raised, whether borrowing should be tightened or whether the threat of a recession is looming.

It measures output, income and spending, all of which are coalesced into one data point that gives a snapshot of economic vitality and progress.

Why should mortgage professionals care?

Housing — particularly residential investment and spending on housing services — makes up more than 15 percent of the GDP on average, according to the National Association of Home Builders. In its tally, the GDP measures the construction of new single-family and multifamily homes, residential remodeling and the production of manufactured homes. It also gauges housing services, which includes rents and utility payments.

Because housing historically has been one of the strongest and most stable pillars of the U.S. economy, its performance has a direct effect on GDP.

When residential investment is robust, the economy is stimulated on multiple fronts. It's a cause-and-effect relationship: construction needs create jobs; jobs expand incomes; more income means more people can afford mortgages, rent and the amenities associated with housing, such as furniture, utilities and home repair and renovations. All those things together spur the housing market and, as we know, if the housing industry is strong, the rest of the economy will follow suit.

Interest rates on the rise

 Interest rates surged upward this week after stronger-than-expected economic data propelled yield on the 10-year Treasury to record levels.

The yield on the 10 Year Treasury note rose to 2.47 percent earlier this week, its highest level since March. Mortgage rates have followed this move, as well. The upswing was fueled by a sell-off on speculation that Trump would choose Stanford University John Taylor to succeed Janet Yellen as chair of the Federal Reserve.

Markets consider Taylor a hawkish choice because of his rules-based view and pioneering of the Taylor Rule, his own formula for setting interest rates. His feelings on interest rates differ from the more cautious Yellen, and he'd likely be more aggressive about raising rates higher and more often.

The Treasury yield directly affects mortgage rates and consumer and business loans. As it moves, so do interest rates. Michael Schumacher, Wells Fargo's director of rate strategy, speculated that if Taylor did get the nod for the Fed's top job, the 10-year could jump to 2.60 or 2.65 percent, according to CNBC.

A heads up from the MBA

 This week, I attended the Mortgage Bankers Association's annual conference and trade show  in Denver, where thousands of mortgage professionals across the nation gathered to network and hear from some of the best and brightest in the industry.

There, Michael Fratantoni, the MBA's chief economist, delivered the trade group's forecast on how purchase volume and interest rates will behave in the next few years. Purchase mortgage volume is expected to grow through 2020 but refinances are expected to keep falling as interest rates climb. As for rates, Fratantoni said we should expect them to rise to 4.6 percent next year before increasing above 5 percent in 2019 and 2020.

Lynn Fisher, vice president of research and economics for the MBA, quelled fears about a possible housing bubble by stressing that home prices are expected to stabilize, if not decrease, in the coming years. And while that's positive news, worries persist over sluggish wage growth and how it impacts housing affordability.

But Fratantoni said that better wage growth is on the horizon. Companies that find it difficult to fill open positions are going to begin increasing wages to attract qualified candidates, he said. That may dissuade borrowers from exiting the housing market even in the face of higher interest rates so long as their income improves.

Also grabbing headlines at the conference was MBA President David Stevens' announcement that he plans to retire next year. He'll stay on through the end of September 2018 to give the MBA time to find a new leader. Stevens became CEO of the MBA in 2011 after serving as commissioner for the Federal Housing Administration in the Obama administration.

In other housing news…

• A survey from Freddie Mac shows that more people believe renting is a cheaper option than buying a home. That's primarily because as rental rate increases begin levelling off, home prices keep soaring in response to shrinking inventory. Roughly 76 percent of renters this summer said they feel renting is more affordable than owning, up from 65 percent in September 2016.
• National Mortgage News reports that economic growth is expected to push purchase originations up by 7.3 percent in 2018. Refinance volume, however, will drop an estimated 30 percent.
• Mortgage applications fell 4.6 percent for the week ending Oct. 20, according to HousingWire.