The Summer Rally was stronger and lasted longer than I thought it would. It's over now, and the correction has begun. IMO this correction will be followed by a year end/January effect rally, which may fall short of Summer high water mark. After that I believe there will be a significant bear market leading into recession or worse. There is no escaping the impact on the economy of continuing rate rises and ever higher oil price. The recession and higher interest rates will just about do it for the housing bubble. Oil will come down on its own as Worldwide demand declines due to poor economy led by US recession. These predictions likely mean Republicans lose 2006 mid-term elections and White House in 2008.
You have it all wrong: the higher the price of crude goes, the lower the consumer price index as people have less to spend on items comprising the CPI. With lower inflation long-term rates are heading down, not up. It is what Greenspan calls the conundrum. The only reason banks raised the prime rate is to screw people with home equity loans that are tied to the Federal Fund rate via the prime rate. Companies are awash in cash, none borrows at prime fer sherr. What will put an end to spiraling real estate prices is people's ability to borrow or peons starting to lose their jobs. Illegal aliens are now eligible to obtain mortgages in Illinois, these are tricks to sustain the boom or prevent the starting collapse. My friend from Libertyville, IL, tells me some asking prices of unsold property are lowered by $40K from their June peaks. The correction may well be under way in the Liberal state, but here in SC the end of the bubble is nowhere in sight.
Remember too that people who cashed in their real estate chips have only one place left to invest their gains: stocks and bonds!!!
Kiki, I still believe the reason Fed is raising rates has to do with keeping the Dollar afloat so that foreigners keep lending to us and to keep foreign and big domestic lenders from loss due to devaluated principal. The US is addicted to living beyond its means. The foreign lender spigot must keep flowing or way of life in this country will change for the worse. Recently, I read in Chicago Tribune that the US consumes 80% of the World's savings through purchasing US debt. Snug
Your forcast of the economy is very much to the point, unless we receive a major positive news. What you forgot to mention was the world politics and war in Iraq. Together, all these things may work to shift the world power or worse. It is time for the people in this country to unite and bring down the oil use by smaller cars and car pooling. There is a war out there, and people need to wake up and fight against it, but together.