Despite signals by the Federal Reserve that we may be nearing the end of their pattern of [measured rate increases [Bloomberg]](http://quote.bloomberg.com/apps/news?pid=10000006&sid=afZ1_rfXRcTc&refer=home), the economy expanded at the end of 2005.

Economic expansion, can prompt the start of inflation, which could mortgage rates to rise. Its not clear yet whether this should be a concern. There has been some speculation that the economic data in November/December is inflationary only because the economy played catch-up after the two hurricanes caused extensive damage to Gulf states.

[The Beige Book is an anecdotal analysis of the economy by 12 regions [Fed]](http://www.federalreserve.gov/fomc/beigebook/2006/20060118/default.htm)

Here’s the national overview for real estate. There is more detailed discussion in each regional analysis:

Many Districts reported moderation in residential real estate activity, although from a high level. Boston, New York, Cleveland, Richmond, Atlanta, Chicago, and Minneapolis reported some cooling in real estate markets. While some of the hottest markets in the San Francisco District have cooled–for example, Southern California and the San Francisco Bay Area–other areas, such as Oregon and especially Hawaii, have reportedly heated up further. Kansas City and Dallas continued to see strong housing markets. And construction and repair work remained brisk in Louisiana and Mississippi.

Conditions in Districts’ commercial real estate markets generally continued to improve. Vacancy rates fell in the San Francisco, Minneapolis, New York, Dallas, Richmond, and Kansas City Districts. Chicago reported a more mixed picture, with some areas of the District expanding but activity in the city of Chicago flat. Largely because of lower vacancy rates, rents rose in San Francisco and New York, while previous concessions were reduced or eliminated in Dallas. New construction activity was reported to be increasing in the San Francisco, Minneapolis, St. Louis, Atlanta, and Cleveland Districts, and many contacts expect this trend to continue in 2006.