With all the stock market jitters about Fannie Mae, Freddie Mac and the U.S. mortgage system, you might have the impression that the real estate market is on the edge of some sort of cliff.

But that's wrong: Would you believe that new home loan applications jumped by a seasonally-adjusted seven and a half percent last week, according to the Mortgage Bankers of America's national survey! Applications to purchase homes using FHA loans surged by nearly 20 percent.

Even the economy continues to defy predictions of imminent recession. Economic growth in the second quarter is expected to hit a vigorous 2.3 percent annual rate, according to Orawin Velz, chief forecast economist for the Mortgage Bankers Association.

The spurt is the result of booming exports tied to the weak dollar and higher sales at chain stores attributable in part to the economic stimulus plan.

But there's a flip side to all this, warns Velz: Prices of imports to consumers are rising sharply -- up by 2.6 percent in June, for the second straight month. So watch out on the inflation front.

Mortgage rates rose slightly last week -- to an average 6.4 percent for 30-year fixed rate conventional loans, up from 6.3 percent the prior week. Fifteen year loans inched up to 5.94 percent from 5.9 percent the week before.

And how about this: Even the co-founder of the Standard & Poor's Case/Shiller housing price index, which has generally reported the scariest price drops of all indexes during the past two years, is now saying that prices are leveling off and increases are on the way.

Professor Karl Case, an economist at Wellesley College, was quoted in the July 12 stock market advisory publication IStockanalyst.com, that the current drop in new home construction has hit a point where, based on prior downturns in the 70s, 80s and 90s, price declines should soon be over in many hard-hit areas.

In fact, the latest Case/Shiller index showed definite hints of a turnaround. Although on a national basis the index found prices down by 15.3 percent year over year, prices actually rose in eight out of the 20 top metropolitan markets.

Those improving areas included Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Portland Oregon, and Seattle.

David Blitzer, chairman of Standard and Poor's index committee, commented that virtually none of the journalists who interviewed him about the latest Case/Shiller index had any interest in the positive local performances. "They seemed to focus (instead) on the bad year-over-year number," said Blitzer.

No surprise: We've been saying the same thing for months here at RealtyTimes.

Published: July 17, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.