The economy
In and around a few dozen metro areas:
Home prices are at risky heights. In each, prices have soared by at least 40% over three years, fueled by low mortgage rates and a burgeoning wave of speculative buying, as well as population and economic growth.

Odds are, some of them will take a hit. They’re vulnerable to any sort of bump: Layoffs in a key industry, such as defense. A terrorist threat that derails tourism. Slipping income or slowing population growth.
At best, appreciation will cease. At worst, prices dip a few percentage points.

Areas at risk due to very high prices rim the edges of the U.S.
In the East: Providence, R.I.; Barnstable, Mass.; Atlantic City and Ocean City, N.J.; Poughkeepsie and Kingston, N.Y.; Washington, D.C.; plus Miami, Melbourne, Port St. Lucie, and Punta Gorda, all in Fla.
In the West: 14 California metro regions, sprawling from San Diego to Redding to Sacramento, plus Carson City, Las Vegas, and Reno, Nev. Of the 28 top gainers, the California communities may be the least at risk, thanks to the state’s diversified economy and robust population growth, as well as tough restrictions on land use in the Golden State.

Other susceptible areas with slightly less heady price gains but more speculative building or adjustable mortgages than average include Boston, Chicago, Denver, and Sarasota and Ft. Myers, Fla.
The most and least pricey homes are most sensitive to dips. Prices on luxury homes are rising too fast to make trading up worthwhile. At the bottom end, subprime borrowers will be squeezed by higher rates.

As the hottest markets in the country cool ... gradually chilled by rising interest rates ...
Average price gains and total sales will slip. This year, average prices will climb 5%-6%, perhaps a bit less than that next year. That compares with a remarkable 11% in 2004. Sales will hit a new record ... 8.05 million ... for a fifth consecutive year, then ease in 2006. Housing starts in 2006 will also slide a bit from this year’s total of nearly 2 million.

But most regions won’t see too much difference.
Gains are more modest and more sustainable outside the hot spots, and it would take a major shock to cause a crash.

Autos
How long before we see a new Big Three of automakers in the U.S.?
Not very. Toyota will pass DaimlerChrysler this year to become the nation’s No. 3 seller of new autos and light trucks. Honda and Nissan are also coming on strong. By the end of the decade, both may join Toyota in the top three. But if GM survives intact, its sales may still be large enough to keep it among the new Big Three.
The new leaders will significantly alter the supplier market. The bulk of U.S. auto suppliers do the vast majority of their business with GM, Ford, and DaimlerChrysler. Many are scrambling to gain favor with foreign brands, but such shifts can be complicated and costly. For Delphi, Visteon, and many other suppliers, the road will be rough.

High gasoline prices are giving diesel-powered vehicles a lift.
Diesel engines can boost gas mileage by 25% in large vehicles, including SUVs and big pickup trucks. Car buyers are taking notice.
Sales will nearly double by 2010, from 450,000 units in 2004, although diesels will remain a small fraction of overall vehicle sales.
By 2010, most automakers will have a few diesel-powered entries in the U.S., led by Mercedes, BMW, VW, and DaimlerChrysler’s Jeep. GM and Ford will sell diesel engines mainly as an option for pickups.

Parts shortages are putting a damper on sales of big trucks, frustrating trucking firms that are eager to replace their old rigs. Many buyers want to beat new emissions rules taking effect in 2007.
But while sales could be stronger, they’re not too shabby, likely climbing another 20% through the rest of the year and about 20% in 2006. Parts problems are trimming a few percentage points from growth.
The shortages won’t ease soon. China is a leading culprit. It’s buying up specialty steel used to make bearings, axles, and so on.

HR
Certification of job applicants will help employers with hiring. Next spring, state jobs agencies will start testing the ability of entry-level candidates to read, write, do math, and follow directions.
Employers can be assured job seekers have at least basic skills. Applicants who fail the standards will be steered to remedial training.

Top-to-bottom dispute resolution policies save companies money. Many big employers, including GE, Shell Oil, Halliburton, and Coca-Cola, use them to settle problems with workers so they don’t end up fighting in court. The same policies can easily work for small businesses, too.
The key: Give workers a chance to air any grievances early on. Establish open-door policies and allow alternative routes for complaints to be heard and resolved, such as via ombudsmen and peer-review panels.

Coming: An Internet domain just for jobs. It‘ll help employers cast a wider net and make it easier for job seekers to find work, too. Although some employers list jobs on their current company Web sites, postings are often unseen and difficult to find with search engines.
The new Web addresses will cost about $100 each. For information on how to get one for your firm, go to www.shrm.org/dotjobsapp.asp.

© 2005 The Kiplinger Washington Editors, Inc.