For the first time in five months, new home sales, booked at contract-signing, showed gains, but housing prices were lower than a year earlier. Total homes for sale were lower, due to fewer new homes being under construction, according to the Census Bureau, as the housing industry lowers its prices to sell-through standing inventory.

Home sales in both new and existing homes hit record highs in 2004 and 2005 when approximately 14 percent of the U.S. population, or 39 million Americans, moved house as buyers and renters.

This could be the beginning of a housing turnaround.

At least homeowners think so. According to the Second Annual RBC Capital Markets Consumer Survey, nearly half of all homeowners still expect at least 5 percent annual increases in their home values over the next few years. While this is down from almost 60 percent of homeowners surveyed last year, it's still optimistic when compared to the dire warnings of the financial press.

For example, James Hagerty of the Wall Street Journal, suggested on September 12, 2006 that home sales have "plunged over the past year in many areas where prices had soared over the preceding five years." Actually, year-over-year, sales have eased. While home sales did plummet in August 12.6 percent from August 2005, the full story is that prices only went down 1.7 percent. That's a negligible change in a year's time, especially in light of rising inventories not seen since 1993 -- the last recorded housing recession.

We know what happened after that -- a record-breaking 14-year run on housing, five of which set consecutive records in sales and prices.

While the survey of 1,003 homeowners is small, it revealed that 25 percent of them have already paid off their mortgage -- twice the number of people with risky variable and interest-only mortgages (13 per cent). Further, more than 80 percent of the homeowners said they have at least $50,000 of equity built up in their homes and almost 60 percent believe they have at least $100,000 of equity in their homes.

However, those who entered the end of the housing cycle with variable rate and interest-only mortgages are clearly at risk once their mortgages renew. Nearly 40 percent of those with variable rate and interest-only mortgages are concerned with their ability to meet higher payments, while 13 percent haven't even considered the ramifications. While this is a fairly small segment of the overall survey (approximately 6 percent), it suggests material risk to this segment of the population.

This suggests that the bailing out by investors, which many believe is responsible for the upsurge in housing inventories, will be short-lived and that once buyers reduce the 7.5 months of inventory on hand to below six months, a new boom could begin again. But all that won't happen without a little pain to the economy in the meanwhile.

"While real estate expectations are lower than they were last year, consumers still seem optimistic despite what we are seeing in the marketplace,” said Scot Ciccarelli, managing director and equity research analysts for RBC Capital Markets. "Declining real estate values could eventually impact consumer spending as people don't feel as wealthy as they used to and become less likely to borrow against the equity they have built up in their homes.”