Rates on mortgages are going up because the market thinks that the Federal Reserve will raise interest rates. The highest rate for a 30-year mortgage was 6.67 percent. This is the highest rate in the past four years.
After five great years, the housing market is starting to slow down. The rise in mortgage rates has a big effect on how homes come and go on the market. Some analysts think that as interest rates go up, sales will go down by 10 percent.
The economy got better in the Philadelphia area. Also, business is getting better. Slower progress is being made in manufacturing. Retail sales went up from April to May and are likely to keep going up unless higher gas prices make people spend less overall. In May, both loans to consumers and loans to businesses went up.
Ben Bernanke, who is in charge of the Fed, said that consumer prices are going up at a rate of 5.2% per year. The rise was 3.4% for the whole year of 2005. There are a lot of ways that high energy costs hurt the economy. The economy is flexible and seems to have handled the shocks of the past few years well.
Greenspan had such an effect on the markets that his replacement will have to build his or her own reputation for being effective and quick to act. I hope that the market stays flexible and that we don't have an economic slowdown or inflation.
