Bubble or not, the U.S. housing market has stayed afloat at a high altitude for the past two years. So what do experts look for as the first signs of fatigue in a frothy housing market?

Mark Zandi, chief economist for Economy.com (search), said it won't be buyers who will disappear. Instead, he believes disgruntled sellers will bring the market to a halt.

"People will start pulling their homes off the market if they think they can't sell it at a 'fair price,' which is now perceived to be a very high price," he said.

While debates about whether the robust housing market will burst like a bubble or land like a slowly deflat week or two (of lower mortgage applications) that something fundamental is going on in these markets," he said.

According to the Mortgage Bankers Association's (search) latest survey, applications for U.S. home mortgages decreased last week. Its seasonally adjusted index of mortgage application activity fell 1.6 percent to 672.6 in the week ended April 15.

The dip in mortgage applications came despite a drop in fixed mortgage rates, which some analysts believe is an indication of waning housing demand.

Fixed 30-year mortgage rates averaged 5.83 percent last week, excluding fees, down 12 basis points from 5.95 percent the previous week, according to the MBA.

Douglas Duncan, chief economist at the Mortgage Bankers Association, believes the biggest factor that will drive a decline in housing demand will be interest-rate changes, particularly a sharp shift higher.

"Rates have been so low for so long. But if the 30-year fixed-rate mortgage rate passed the 7 percent mark any time soon, we may see a pause in housing," he said.

Zandi and Duncan are in the camp of those who believe that there is a housing bubble in certain markets that are "infected" by speculative buyers. These are markets in which buyers have no intention of living in the house. Instead, they plan to quickly sell the property and reap the benefits of rapidly rising housing prices.

An increase in aggressive borrowing, practiced by those who look for interest-only or variable-rate loans, also would signal a housing bubble about ready to burst, those in the bubble camp said.

The housing bubbles exist in California, the Pacific Northwest, parts of the Mountain West, all of Florida and along the East Coast from Boston to Washington D.C.

"Bubbles don't pop overnight," Zandi said. "They continue to build for long periods of time. Look at our experience with the stock market. We were worried about a stock market bubble for over three years before it actually burst."

Others look at not so conventional signs.

"When developers start talking about a housing bubble bursting," said one New York developer, who did not want to be identified, "that's when you have one."

Van Davis, chief executive of Foxtons North America (search), is in the other camp that believes there is no bubble. He said that yes, housing prices will go down, but the demographic demand from immigrants and children of aging baby boomers, will rule out the bubble-and-bust scenario.

"California has been frothy over the past 18 months," Davis said. "I hear things are cooling down significantly."

Davis keeps an eye on inventory — measured in the amount of time it would take to sell the current number of homes available — to gauge the market. Right now, it would take about 4.2 to 4.3 months to clear the current inventory.

"By any historic measure, a balanced market is six months," he said.

During the tough real estate times from about 1988 to 1993, inventory levels approached 13 months.