_[If you feel good about the housing market right now, skip the first half of this post. I don’t want to ruin your day. -ed]_

For Current Pessimists

Peter Coy surmizes that _Real estate bulls shouldn’t count on the Fed abandoning further hikes. Here’s why the squeeze could well grow worse_ in his [Why Housing Looks Rickety [BW]](http://www.businessweek.com/investor/content/apr2006/pi20060420_734337.htm) piece.

* The stock market seems to be betting that housing is safe from higher mortgage rates.

* Investors are happy about low core inflation, yet CPI posted an expectedly large gain this month.

* People may be overly exuberant about just released FOMC minutes which suggests the Fed is in a _one and done_ scenario.

* Fixed mortgage rates have been largely resistant to inflationary concerns with modest increases _so far_.

* Incomes have not kept pace with housing prices in recent years and mortgage rates are rising.

* Creative financing has been largely played out by rising prices.

For Current Optomists (noticeably smaller)

* A healthy labor market will offset some of higher mortgage rate’s impact on housing.

* The economy is weaker than thought and unemployment numbers are actually higher, the Fed may be forced to lower the fed funds rate in 2007 ([I speculated about this before](http://matrix.millersamuelv2.wpenginepowered.com/?p=382)) which could prompt a surge in refi and sales activity.