I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey is now available.

As a reminder:

1. The survey is for conforming loans only.
2. I welcome emails from readers about purchase or refinance plans.
3. I twitter market updates a few times daily.  Follow me, if you want.

Anyway, on to the group's predictions for the next 30 days:

• 50% of participants predict rates will increase
• 31% of participants predict rates will decrease
• 19% of participants predict rates will remain unchanged

I am predicting that rates will decrease over the next 30 days, but that doesn't mean you should necessarily follow my advice when choosing whether to lock a rate, or float it.  My advice may not be appropriate for your individual situation.

From the Bankrate.com survey:

"Gas prices down means inflation pressures subside, leading mortgage rates lower."

The gas-price-to-mortgage-rate relationship isn't direct, but rising prices have had a psychological impact on both Wall Street and Main Street.  We should expect that falling prices would do the same.

I've been using Twitter to communicate the mid-day market shifts to clients and there's been a lot of them.  It's simple to set up and completely non-intrusive.  You're welcome to follow me if you'd like the updates, too.

For the third straight month, at least 15 of the nation's 20 largest real estate markets showed relative monthly improvement in May 2008, according to the S&P/Case-Shiller Home Price Index.

I use "relative monthly improvement" as another way of saying that markets are "less worse than they were" and that's good for the housing market (although you wouldn't know it by looking at the headlines). 

Instead of pulling the positives out from the data, newspapers are highlighting the year-over-year, cliff-diving-like decline in prices. 

Now, it's not wrong to look at annual trends in home prices, it's just a little bit misleading.  Remember: Active home buyers are probably seeing something completely different from what the papers are saying they should be seeoing.

See, year-over-year comparisons are fine for identifying long-term trends, but as it relates to an active home buyer, annual data don't mean diddly.  It's the short-term trend that matters.

The obvious example: If you've been shopping for a home over the last 3 months, you've probably noticed the market slowly slipping away from you, and moving into the sellers' favor. 

When you see "all the good homes" go under contract, or sellers regaining their negotiation power, it's your sign that the market is shifting.

In other words, if you're buying a home now, the real estate market of 12 months ago is irrevelant.  What you're going to pay for a home is based on market activity today, not activity from 2007.

(Images courtesy: Standard & Poor's, The Wall Street Journal)

If you study mortgage rates long enough, you realize that "good mortgage rates" are under constant attack from a number of sources, including:

• World events and geopolitics
• U.S. employment data
• U.S. government and policy
• The price of oil and gasoline

And this is just a sampler. 

There are literally thousands of reasons why mortgage rates behave the way they do and it's why there's no perfect answer to the question everyone wants to asks:

"Do you think rates will be higher later this year?"

However!  One thing of which we're certain is that the biggest threat to "good mortgage rates" is inflation.  When inflation pressures build, mortgage rates tend to build.  And, when inflation pressures fall, mortgage rates often fall.

This is because inflation erodes the value of the U.S. dollar which makes mortgage interest worth less to the bank that collects it.  The only way to compensate the bank for the diminishing value of its investment is to charge more interest. 

Hence, rates rise when inflation is present.

Earlier this summer, rising energy costs pushed inflation levels to their highest levels in many moons and mortgage rates followed.  Over the past 2 weeks, however, energy seems to be reversing its course. 

Since July 15, gas prices are down 17 cents per gallon nationwide.

Of course, you've probably noticed this already and don't need me to point out the deeper implication, but when the cost of filling up your gas tank gets smaller, your personal Cost of Living gets smaller, too.  That's a good thing because falling personal costs is the opposite of inflation and inflation is bad for mortgage rates.

Now, we can't predict where interest rates will go tomorrow because too many rate-impacting factors are unpredictable.  Political events, for example.  But, we can watch some of the key indicators from everyday life and follow along at home.

Next time you fill your gas tank, take note of the gas price per gallon.  It's not an exact rule, but if gas prices are falling, you can bet that mortgage rates are facing one less reason to go higher.

(Image courtesy: GasBuddy.com)