...but you can't really focus on one sector of the economy and use it as an indicator of the entire economy. You can be sure that Fannie Mae's economists factor housing into their analyses!

The housing boom is an anomaly fueled by low interest rates. Low interest rates, in turn, are the result of the decline of the stock market and the flight of capital into more secure government bonds. The cost of government bonds, in their turn, is heavily influenced by Federal budget deficits, which are forecast to explode, driving up the prime rate and all consequential rates including mortgages and housing construction loans. Bottom line: Don't count on housing to save the entire economy.

Mortgage interest rates are contrarian. I work in a mortgage office, and the loan officer watches all the major economic indicators. Every time the stock market goes down she cheers, because mortgage rates will go down. She curses any sign of economic recovery, because it means rates will go up. Be skeptical of housing and mortgage interest rates as economic bellweathers--they may actually be bad news.

--Robert