The number of mortgage applications dropped this week, but does that foretell a continuing troubled housing market? Other indicators are more positive.

According to the Mortgage Bankers Association, the number of applications filed for mortgage loans at major U.S. banks fell by 0.6 percent last week compared to the previous week, concurrent with an uptick in mortgage interest rates.

The average rate for the benchmark 30-year fixed-rate loan rose to 6.19 percent from 6.13 percent the previous week.

The MBA also said that the rate for a 30-year fixed-rate mortgage would rise to 6.5 percent by the end of 2007 and that sales of both existing and new homes would decline this year.

While home sales and prices have declined in 2006, there's plenty of reason to be optimistic that the ones dropping out of homebuying are the speculators and that buyers who want to live in their own homes are still plentiful.

One reason is that loan applications are up overall, because refinancings are pushing upward. Applications to refinance existing loans increased 6.3 percent last week, up about 24 percent compared with the same week a year earlier.

This suggests that people who are in their homes are hunkering down for the duration of several years. Because of transaction costs, most refinancers will plan to be in their homes at least two to five more years.

The National Association of Realtors' eonomists expect existing-home sales for 2006 to come in at 6.50 million, making the year the third highest on record. For 2007, the trade organization predicts a total of 6.42 million homes sold for 2007.

Also optimistic is the National Association of Home Builders. The NAHB reports that while housing starts (houses beginning construction) were down 25.5 percent when compared with a year earlier and permits to build were down 10 months in a row (31.3 percent,) that decreased inventory and lower prices is reigniting buyer interest.

"Builders are starting to see that the worst is behind them and that buying conditions have improved to the point that greater optimism is warranted," said David Seiders, chief economist for the NAHB. The mood, he says, reflects lower mortgage rates since mid-year, lower energy prices, and solid growth in jobs and incomes.

Energy prices may be the wild card. While mortgage interest rates are rising gradually, but slowly, other economic news such as high gas prices aren't exaserbating consumers' worries. Last summer when interest rates hovered near 7 percent, housing sales stalled, but consumers were unnerved by the parallel of record high gas prices. With the immediate worry of how to keep their SUV's filled with gas, home shopping seemed to be less of a priority. Since then, gas prices have leveled off to the lowest prices in 20 months, according to the Fuel Gauge Report.

Pump prices are back down to about $2 (regular unleaded) a gallon, while last summer the prices reached nearly $3 a gallon.

Published: January 18, 2007

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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. For more articles by Blanche, click here.