My limited predictions...
1. The Fed will not raise interest rates any more for the forseeable future.
2. Housing material prices will be sky high. Forget about building or adding on for a year or so.
3. 1 and 2 will combine to keep housing markets high throughout the country. Forget about predictions of a "housing bubble bust".
1. The Fed will continue to raise by 25 basis points at least until Greenspan retires after the Jan 31st 2006 meeting. During that time, GDP will continue to expand in the 2-4% range and inflation will remain under 3%.
2. Housing prices will rise, but not to "sky high" levels. There just aren't that many houses in the affected areas relative to the national supply, and construction was easing off already.
3. The "housing bubble" is a very real but very local phenomenon. Expect the bubble to burst in overheated local markets such as Las Vegas and South Florida. Remember that all real estate, like all politics, is "local."
I'm betting on the Feds continuing to raise interest rates regardless. Talks about a recession at this point are premature and unfounded.
The basic fundamentals in the market are unchanged. Consumer spending will be less diverse, but consumption will increase rather than decrease.