Mortgage applications are beginning to rise, however existing home sales are lackluster. The number of homes available for sale is decreasing which is a positive indication that the market is stabilizing. The 16% drop in mortgage activity for the first half of 2006 was heavily influenced by non-traditional loans. Strong demand for interest only options was an influence.

The Federal Reserve FOMC (federal open market comittee)  meeting left interest rates unchanged at their meeting Tuesday, October 26, 2006. Not withstanding Lehman Brothers prediction that the Fed will have to tighten by at least another quarter point to stem inflation pressures, Federal funds futures give no indication of any coming rate hike or cut for the next several meeting. The cooling of the housing market was indicated a prime factor in the no change vote.

On the defensive side, one of the largest mortgage lenders is cutting 2,500 jobs to weather out the housing slump. Hoping to save $500 million, Countrywide is cutting down its labor force.

However, the second home market has seen activity with the baby boomers. A recent survey shows future growth in second homes due to the sheer size of the baby boom generation.