Q:We would like to buy a home soon, but we’re worried that values are going to start falling because they have been going up for so long. What do you think?

A: Prices in most U.S. housing markets should keep climbing for at least another year or two, as mortgage rates remain low and the economy continues to grow at a slow but steady rate.

Q: Why do you think home prices will keep rising? Every time I pick up the newspaper or turn on the television, it seems like someone is saying that the “housing bubble” is about to burst and that prices are going to drop.

A: True, some so-called experts are saying that home values have finally peaked and a sharp decline is just around the corner. But remember, many of those same people originated that “housing bubble” nonsense way back in 1999: The price of a typical U.S. home has since climbed by more than 40 percent, and values in several markets have doubled.

There’s still room for more price growth. Demand for new homes continues to outstrip supply in most parts of the country, inflation remains under control, and few economists are predicting a market-busting recession any time soon. Those are just a few of the factors that should keep pushing prices higher in most parts of the nation through this year and next – although probably not at the staggering 15 percent or even 20 percent annual rate that some markets have enjoyed in the past few years.

Q: What about mortgage rates? Have they finally bottomed out?

A: Rates on 30-year, fixed-rate mortgages have lingered in the 5.5 percent range for months. They’ll probably go up a bit in the second half of this year and in 2006, but not by much: Many economists see an increase to about 6 percent by December and to roughly 6.5 percent at the end of next year.

The fact that rates are expected to increase only gradually is another reason why housing prices and sales should remain strong in the next several months. Most forecasters agree that the market easily can absorb a slow rise in interest rates, and no credible economist believes that rates are poised for a sudden run-up.

Q: If rates are expected to slowly climb, would this be a good time to refinance my adjustable-rate mortgage?

A: This might certainly be a good time to consider refinancing from an ARM to a fixed-rate loan, especially because rates on many of the ARMs that were issued in the past few years are now as high – or even higher – than the 30-year fixed rates that several lenders are offering today.

Of course, there’s nothing “automatic” when it comes to refinancing a loan. For example, refinancing now probably wouldn’t make sense (even if it results in a lower rate) if you expect to sell your home and move before the savings you’d reap by lowering your monthly payments would offset the fees and other costs of taking out the new loan.

Q: Which U.S. housing markets should fare best during the rest of this year and next?

A: No one can pinpoint which two or three cities or even states will see the biggest price gains next month, let alone next year. But Lawrence Yun, the respected senior economist at the National Association of Realtors, recently went out on a limb by identifying three different housing “sectors” that he believes will see a new round of double-digit price gains in the next two years.

The first sector is what Yun calls “heavy in-migration” areas, including Florida and Nevada, where prices should continue to be fueled by a growing number of people who are coming from other parts of the country.

The second sector is comprised of retirement areas that are gaining in popularity but have prices that are still relatively affordable. Yun says those spots include Charleston and Myrtle Beach, S.C.; Virginia Beach, Va.; the panhandle of Florida; the coast of North Carolina and much of Alabama.

The final sector poised for some of the sharpest home-price gains includes cities or entire regions that will benefit as the high-technology industry continues to rebound. That’s good news for homeowners and future buyers in Seattle; Denver; Austin, Texas; and North Carolina’s “Research Triangle” of Raleigh-Durham-Chapel Hill.

Homeowners seeking to refinance before interest rates move higher will find several money-saving tips to get the best loan deal and an easy-to-use worksheet to calculate their potential savings in our booklet “Refinancing the Right Way.” For a copy, send $4 and a self-addressed, stamped envelope to David Myers/Refi, P.O. Box 2960, Culver City, CA 90231-2960. Send questions to that same address and we’ll try to respond in a future column.