The National Association of Realtors just announced that 2005 will be the fifth year in a row for record housing sales and that 2006 will be near record highs.

Yet, other news suggests that housing could be pulled down by rising interest rates and renewed fears that inflation might not quite be under control.

The Federal Reserve raised short-term interest rates for the 13th time suggesting that chief Alan Greenspan plans on turning over the reins of Federal monetary policy to his successor Ben Bernanke with inflation as much under control as possible.

The question is this: How will the markets respond?

The elimination of the word "accommodative," is new language in the Fed's statement that suggests policy-makers believe rates are no longer low enough to stimulate economic growth. Instead, rates are high enough to slow growth and inhibit inflation.

"Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained," stated the Fed. "Some further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance." It added that "the Committee will respond to changes in economic prospects as needed to foster these objectives."

After 18 months of rate hikes, which impact long-term interest rates eventually, the housing market is still in excellent shape, and might even afford new opportunities to homebuyers. The reason? Long-term interest rates don't move in tandem with short-term rates. Long-term rates are tied to treasury bonds, which could lower yields in an inflation-controlled environment. Mortgage interest rates would follow.

Experts, such as David Lereah, chief economist for the NAR, expect the 30-year fixed-rate mortgage to trend up modestly but stay well within historic norms of 6.5 percent through the second half of 2006.

The NAR expects the gross domestic product to grow 3.7 percent for 2005 and 4.1 percent for 2006, with a rise in employment. Housing prices will continue to rise but not at the double digit clip of the last few years. While home prices rose over 12 percent to $208,800 in 2005, they are anticipated to rise another 6 percent in 2006 to $221,400.

Published: December 15, 2005

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.