According to the Mortgage Bankers Association, both purchasing and refinacing mortgages was down for the second week in a row last week. The average 30-year fixed mortgage was 5.47% and the average one year ARM was 4.46%.

It is probably a fact that the real estate market cannot continue its torrid pace, but for now, the market is showing few signs of relenting any time soon.

While the Oracle of Omaha, Warren Buffet, told CNBC yesterday that he was getting worried about real estate, he didn't predict a crash, only that those financing home purchases with Interest-only homes could get burned.

The facts, ultimately, are still pretty clear. Existing home sales in May were at the second highest level ever recorded, and 30-year fixed rates averaged 5.57%, compared to last year's 6.25%.

"Given that mortgage rates aren't expected to move in either direction any time soon. We fully expect the housing market will continue to thrive well into the foreseeable future," stated Freddie Mac vice president and chief economist, Frank Nothaft.

Whether there is a bubble or not, a bursting of the bubble does not appear to be in the foreseeable future - barring some major catastrophe or huge loss of jobs.

"We're forecasting that 2006 will be a trend growth year for the economy with an increase of about 3.5 percent in the GDP," said Douglas Duncan, chief economist for the Mortgage Bankers Association. Duncan believes that, based on historical data, baby boomers will drive much of the real estate market in 2006, and that interest rates will increase slowly over the course of the next two years. He also predicts that the number of homes sold in 2005 will break the record for the 5th year in a row.(More from MoneyCNN.com)

New mortgage tools, such as Interest-only loans or ARMs, have made it much harder to determine the 'real' value of real estate. That's because creative financing makes it easier for marginal buyers to bid up the price of a home, possibly inflating the real value of a home. Additionally, more and more home appraisers claim that mortgage originators only work with those that are willing to over-appraise houses, again possibly inflating the real value of real estate.

In the 80's, when similar loan programs were offered in California, these mortgage tools resulted in a default rate that was 3 times higher than conventional mortgages according to UBS mortgage strategist, David Liu.

Lots of defaulted loans will ultimately push home prices lower.

According to BusinessWeek writer, Peter Coy, "If lots of your prospective neighbors are taking out loans with low initial payments but much higher costs down the road, it could mean that they're stretching to buy houses they otherwise couldn't afford. That's a sign of an overpriced market."

In 2004 in San Diego, 48% of mortgages were financed with interest-only mortgages. San Francisco stood at 45%. Los Angeles didn't even make his list.

While that doesn't mean that there isn't some bubbling in the Los Angeles real estate market, it does indicate that there appears to be much less speculation in Los Angeles than in the other hot markets of California.

That's good news for Angeleno home owners.

If you've owned a house in Southern California for more than a few years, you're probably sitting on a load of equity. Great, you might think, I'll move into a bigger, better house.

Then you realize the price of that bigger, better house has also skyrocketed. Thus, property taxes will also be higher, as will broker's commissions, escrow fees and closing costs. And you're not the only one thinking that according to a new article, Cost of Moving Up Keeps Many From Selling Homes.

James Joseph, owner of a Century 21 realty franchise in Whittier, calls it the "golden jail" of homeownership. Even though they are sitting on a ton of equity, "a lot of people aren't selling … because they can't afford to move up," he said.

"There are a million bubble theorists, but the bottom line is: If no one is interested in selling, you're not going to have a market going down," said Michael Davin, executive vice president of South Bay-based real estate brokerage CataList Homes Inc.