Mortgage rates punched through five-year highs in mid-May powered by the Fed's tightening of the money supply, but already have begun retreating. Economists say housing is beginning to get back on track.

The average interest rate on a 30-year fixed-rate mortgages hit 8.64 percent, up from 7.23 percent just last year and the highest rate February 1995 when the 30-year mortgage money averaged 8.73 percent.

Fifteen-year mortgages hit 8.31 percent, compared to 6.83 percent a year ago and, again, the highest since 8.31 percent in February '95.

Housing economists for the National Association of Realtors, however, say the worst should be over. They expect the 30-year fixed rate to hover around the 8.4 percent for the next six months, then decline.

Home values outpacing inflation

Researchers studying the numbers coming out of the Fed suggest home ownership continues to be a solid investment for most Americans.

Dr. Fred Flick at the National Association of Realtors notes that consumer price inflation will likely average 2.9 percent in 2000, while the median price of an existing U.S. home is expected to increase by 3.4 percent this year to $137,500. The media price of a new home is expected to rise 4.2 percent to about $166,100.

The main support under housing prices, says Flick, is the fairly widespread lack of inventory, i.e., not enough people want to move.

If you lived here you'd be home by now

Worth magazine is out with its annual list of America's 250 most expensive places to buy homes, with Jupiter Island, Fla., ranking first.

The median price of a home on Jupiter Island is $1.9 million. Following Jupiter were:

• Aspen, Colo., $1.75 million
• Atherton, Calif., $1.7 million
• Belvedere, Calif., $1.5 million
• Rolling Hills, Calif. $1.42 million

Worth looked at home prices over the past two years to come up with its list. The median price of median homes in the top 250 communities was $555,841.

Would you like a home to go with those curtains?

One of the nation's largest home builders is taking a page from the retail shopping experience and opening "Dream Home Studios" where consumers can come in and shop for accessories and upgrades to their new homes.

Kaufman and Broad Inc. argues that currently home buyers have to go out to the garage of a development's model home to see what kind of options builders have available and at what price. The builder believes, however, most consumers would be much happier shopping in a store than a garage.

Customers can get everything from upgrades to a whole house at the stores. The first Dream Home studio will open in Phoenix, with others to follow around the country.

Inspections help protect everybody

Real estate educators Don Harlan and Gail Lyons, writing in a real estate trade newsletter, note that in 1989 only 10 to 20 percent of homes had professional property inspections, but by 1999 that rate had increased to 60 to 70 percent.

"This change came about because good, competent property inspections can substantially reduce the risk of liability for both sellers and their (agents)," the educators write.

Historically, surveys show the biggest source of problems evolving out of real estate deals have to do with undisclosed property defects. A good home inspection is easily worth its price.