NEW YORK (CNN/Money) - We're watching bond yields, and therefore mortgage rates, rise and mortgage applications fall, signaling perhaps a bit more cooling off in the hot housing market.

Indeed, U.S. mortgage applications fell for a second consecutive week as interest rates on home loans climbed to 16-month highs, the Mortgage Bankers Association said Wednesday.

But there's a reason not to get too worried about how far this goes.

For one, the more signs that housing demand is getting less overheated and price increases are slowing down, the more the bond market may worry about the economy. After all, there will be less ability to extract money from homes via refinancing.

Consumers may grow more cautious. If spending slows, the economy slows and presumably there's less worry about inflation -- even at the Federal Reserve!

In addition, when the 10-year note yield approached 5 percent in recent years, it seemed that the appetite of investors to buy bonds increased the higher the yield got. And of course the more people buy bonds, the lower the yield goes. So once again, there could be a sort of built-in brake on how high yields go if investors are drawn in by the more attractive yields.

Of course, if the Fed decides rate hikes must continue well into 2006, then even worried-about-the-economy bond traders and yield-seeking investors may not stop the tide of rising long-term rates.

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Kathleen Hays is economics correspondent for CNN. Read more of her columns here.