It's like listening for the other shoe to drop. The markets are all watching new Fed Chief Ben Bernanke for signs of a slowing economy. The stock market is teetering and home prices are pausing. Will he or won't he raise short-term rates again?

But as we learned last year, when the Fed raises short term interest rates to banks, it doesn't necessarily mean long-term rates follow. Low mortgage interest rates could continue to decline, sparking renewed buyer interest in homes just in time for the spring selling season.

Here's how it works. In order to slow inflation, the Fed raises overnight rates on money it loans to banks. The banks loan out the money at a higher rate. With money costing more, spending slows down, cooling products and services that overheat, in theory, anyway.

Once in a while, as happened recently, short-term interest rates can actually rise above long-term rates. This made the financial markets very uneasy because there's more risk associated with long-term rates. Banks can't make money on the yield if they're paying more to borrow money than they can make loaning it out.

That's called an inverted yield curve, and many economists consider it a predictor of an economic slowdown. It's also a signal that the Fed could be slowing the markets a little too much, particularly the housing market.

Although the National Association of Realtors doesn't expect housing prices to fall, it's obvious that buyers are starting to gather by the sidelines. Chief economist David Lereah said that homes sales should slide by about five percent. But that's nothing to panic about. Home sales in 2006 could still match the record breaking year set in 2003. He also says housing starts for new homes will fall a little under 10 percent, which will also give a slight boost to existing home sales.

Keep in mind that housing sales have reached new records every year for the past five years. To fall back to the rate of sales of a couple of years isn't a bad thing. Also, home prices are still expected to rise, but not by the double-digits we saw last year. You'll see a much more modest 5 or 6 percent gain nationwide, except in the areas that are benefiting from Lereah's "rolling boom." That's where housing prices are going up in areas that have been tepid until now. Think Utah, Texas, and Tennessee where prices in some communities are expected to rise 8 to 14 percent or better.

Realty Times believes that homebuyers won't sit on the sidelines for long. With rising inventories, there are a lot more dream homes on the market. Buyers will take advantage of temporary dips in mortgage interest rates. So, sellers, put your best foot forward, get rid of clutter, slap on some fresh paint and clean those carpets, closets and cupboards. Don't let the other shoe drop on your dream of buying or selling your home.

Published: February 15, 2006

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.