In the housing market, prices are unlikely to fall on a national basis, but the increases well above the rise in rents and incomes that we have seen in recent years cannot continue indefinitely, and rising interest rates will probably damp these increases even more. Home building should cool a bit as a result, but perhaps more consequentially, as capital gains on housing slow, households will likely turn to reducing the growth of their consumption out of current income as a way of building assets to finance their children's education, their retirement, and so forth.

Higher home prices in turn have encouraged households to increase their consumption. Of course, increased rates of homeownership and household consumption are both good things. However, in the long run, productivity gains are more likely to be driven by nonresidential investment, such as business purchases of new machines.

The demographics suggest there's an increase in demand for housing...in general there isn't much evidence to suggest there is a problem with the level of prices in the housing sector.

The current high rate of increase in house prices cannot continue indefinitely. If housing prices increase at somewhat slower rates, this source of wealth creation will provide less support to consumer spending.