Existing homes sales for July

It's another slow summer week for economic data. Among the sprinkling of economic reports coming out, economists will most likely be keeping an eye on those involving housing and energy.

Mortgage rates have rallied in recent weeks. While 30-year fixed rates are still at historically low levels around 6%, the recent gains may be a precursor to a cooler second half for the housing market. Both new and existing home sales are expected to have slowed a little during the hot and steamy month of July.

To be sure, the demise of the housing market has been forecast many times in the past couple years by economists. However, the risks for a slowing housing market heading into 2006 appear to be rising. If the economy remains strong during the second half, then interest rates are likely to keep moving higher as the Federal Reserve ratchets up the fed funds rate.

The turn in expectations for stronger second-half economic growth and the Fed's reiteration that rates will keep on rising led the 10-year Treasury note to bounce back from 3.9% in late June, to over 4.2% currently. While more jobs and rising income are good for housing, interest rates will be the most important factor.