The housing market isn't overinflated like a balloon about to burst, but the strengthening economy could take some air out of rising home values.

In a federal survey of loan officers, 51.9 percent of them said home values jumped 5 to 10 percent in the last year in markets they served and 13.5 percent said values rose 10 to 20 percent.

Conversely, in the coming 12 months, only 34.6 percent of them expect a 5 to 10 percent increase in home values while 1.9 percent of them expect larger jumps of 10 to 20 percent.

Most, 63.5 percent, expect home values to rise only zero to 5 percent in the next year, compared to 28.8 percent of the loan officers surveyed who said home values rose that much in the past year, according to the Federal Reserve's quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices for April 2004.

"In Silicon Valley, over the recent weeks, we've observed a slowdown in home-price appreciation for the purchase market and, in the refinance market, the appraisals are seemingly accurate and fairly valued. In other words, the market frenzy of multiple offers has pulled back as inventory increases," said Stephanie Noryko, broker/principal with Granite Financial in Cupertino.

Home prices in Silicon Valley recently surged by nearly $60,000 in a single month this spring, only to fall back several thousand dollars in the following month.

The federal survey of 56 domestic banks and 20 foreign lenders examined the supply of and demand for bank loans to businesses and households during the first three months this year. It also contained a series of questions about residential real estate loans that could further arguments against a so-called housing bubble--a condition of overinflated home values suddenly deflating, like a balloon popping.

Bubble-market theorists say, in part, that there are too many overpriced homes and too many homeowners with high loan-to-value ratios. Bubble theorists also say that those overleveraged homeowners will be hit hardest by falling values and perhaps flood the market with foreclosures in volumes that will further depress values.

A growing library of studies to the contrary reveals that most homeowners are not overleveraged and, given the supply-demand equation in most markets, home values have nowhere to go but up.

"What has changed in the last few years is the availability and proliferation of 100 percent financing. The downside is higher interest rates and, in many cases, higher closing costs," said Nino Saso, vice president and branch manager of Pacific Republic Mortgage Corporation in San Jose.

"In the last two months, I have had an increase in inquiries for 100 percent purchase loans. If this continues to accelerate, down the road it could deepen the risk of problems in the marketplace," Saso added.

Along with indicating home values are still on their way up, albeit at a slower pace, the Fed's survey found that, overall, the tradition of lower loan-to-value ratios continues.

Over the past year, 60.3 percent of the mortgage originations came with loan-to-value ratios that were less than 80 percent. An additional 25.8 percent came with ratios from 80 to 89 percent. The remainder, only 14 percent, had higher ratios, from 90 percent to more than 100 percent, according to the federal survey.

"That's accurate. The majority of my clients have low loan-to-value ratios. I generally find higher loan-to-value ratios in the lower price ranges," Saso said.

Even when second mortgages were included (including equity loans), only 19 percent of the loan officers' loans had loan-to-value ratios of 90 percent or more. The survey found 29.6 percent of total mortgage indebtedness had ratios of 80 to 89 percent and that the remainder, most of the home loans, represented total mortgage indebtedness with loan-to-value ratios of less than 80 percent.

"At banks serving markets in which home prices rose 5 percent or less, 7 percent of second-lien mortgage and home equity loan originations were to borrowers with ratios of total mortgage debt to home value of 100 percent or more, and 76 percent of originations were to borrowers with ratios of 90 percent or less. By comparison, at banks originating loans in areas where homes had appreciated between 10 percent and 20 percent (as in Silicon Valley), these shares were 1 percent and 88 percent, respectively," the survey said.

"My bottom-line opinion, even after the Fed raises rates at its June 27 meeting, is that the historically high median home price might decline in the next 12 months, but home values will be greater than current values in three, five and certainly seven years. This is California real estate and, fundamentally, a chronically undersupplied marketplace for housing," Noryko said.

The Federal Reserve's April 2004 Senior Loan Officer Opinion Survey on Bank Lending Practices is available online at http://www.federalreserve.gov/boarddocs/SnLoanSurvey/.

Real estate writer Broderick Perkins, executive editor of San Jose-based DeadlineNews.Com, writes regularly for this newspaper.