Many real estate analysts have noted that one of the keys to the nation's housing boom has been historically low interest rates.

But what happens if rates go up?

When rates went up last Spring, mortgage application activity slowed. Now again, rates are showing steady growth upwards, and every time the Fed raises rates, the inevitability of higher rates seems more obvious. Thus, the fact that, according to the Mortgage Bankers Association, mortgage applications have dropped for the third straight week is a bit alarming.

Even more disconcerting; however, is the fact that ARM loans are heating up as fixed-rate loans are cooling? Why? It seems that the high price of homes have limited the financing options of many homebuyers. Additionally, flippers love to use ARMs.

If mortgage rates continue to rise, by the time these ARMs convert to variable rate notes, the additional costs could be staggering for many new homeowners. Yet, if mortgage applications continue to decline, the cost of homes will have to go down, leaving many home owners 'upside down' and possibly in financial trouble.

All the data seems to indicate a couple of things. Homeowners should be on fixed rates and the price of homes for sale should stabilize and probably trend lower.