NEW YORK -- When real estate agents try to sell a home, they often zero in on the positives -- big closets, great space for entertaining, lots of potential to expand -- and hope everything from creaky floors to dated appliances gets overlooked.

It's the same tactic that the trade group representing many home sales agents, the National Association of Realtors, appears to be using right now: It asserts in a new report that a healthy housing market is here to stay and prices won't likely decline.

But that sounds awfully upbeat given recent data showing that homebuilder sentiment has plunged and that price inflation in certain local markets, including Florida and California, has started to slow. At the same time, inventories are up, mortgage applications are down and real-estate lending, particularly home-equity loans, remains soft.

Where the housing market heads next matters because of its potential economic impact. Lehman Brothers estimates that one-third of economic growth over the last year is a direct or indirect consequence of the boom in home construction, sales and prices. So if the market begins to dramatically shift course, everything from employment to consumer spending to manufacturing could take a hit.

The trouble, of course, is that it's not yet clear if recent signs of weakness are just a blip or the beginning of a market shift, and that is fueling much debate over how much power the current boom has left.

According to the NAR, a downturn isn't likely and surely isn't imminent. In a report that looked at 130 local markets ranging in size from New York and Chicago to Sioux Falls, S.D., and Richmond, Va., it found that "the facts do not support the possibility of a housing bust -- not for these 130 markets and not for the nation."

Many local markets cited in its study were found to be in "excellent shape" with "potential for significant housing equity gains" -- even markets where there have been double-digit gains in prices without strong fundamentals backing such a climb.

To support its findings, Washington-based NAR points out that most metropolitan areas haven't seen overall price declines since 1968, when its record keeping began. It also said Americans shouldn't be concerned that home prices are rising faster than family income.

NAR acknowledged that mortgage rates likely will rise next year as interest rates continue to climb from 46-year lows, but said that should have only a "minor breaking effect on home sales." And though that could slow the rate of price growth, "in many areas, inventory shortages will persist and home prices are likely to continue to rise above historic norms."

But dig a little into the details of the report, and such a rosy outlook starts to seem a bit perplexing, according to economists at Merrill Lynch who analyzed the NAR's findings.

"It's sort of similar to if the Nasdaq had put out a bullish report on tech stocks in early 2000, don't you think?" Merrill Lynch chief North American economist David Rosenberg said in a note to clients.

For instance, in the New York City area, housing prices rose 20 percent over the last year, well above the 13 percent national average gain, and are up 47 percent in the last three years, also ahead of the 32 percent national rise since 2002, according to NAR.

That made it one of the regions NAR judges to be in "excellent shape." But as Rosenberg points out, three-year job growth in the region is down 3.1 percent and it is experiencing negative net migration, meaning more U.S. residents are leaving than moving in.

There has also been plenty of anecdotal evidence in recent months of home and apartment prices being reduced to move the real estate off the market as listings linger much longer than they have in the recent past.

San Francisco is also deemed by the NAR to be a growing housing market. Prices there rose 12 percent in the last year and 40 percent over the last three years. However, job growth there is down 7.1 percent over the last three years and net migration is well below national averages.

In both cities, home buyers also have relied heavily on risky mortgages to finance their purchases, which makes them particularly vulnerable to interest-rate changes over time. Thirty-two percent of New Yorkers have adjustable rate mortgages while 67 percent of those in San Francisco use ARMs, meaning their monthly payments will rise as interest rates go up.

Despite such potential troubles, NAR senior economist Lawrence Yun defends the group's bullish report, saying home sales have shifted from a frenzy to a more sustainable healthy pace.

Yun also acknowledges that the optimistic view is intended to quell concerns of potential homeowners that a housing bubble, which the NAR doesn't believe ever developed, has or is about to burst.

"We are hearing that some home buyers are back tracking from buying because of the housing market bubble," he said. "But we think recent prices increases were justified by fundamentals and the overall outlook still looks very solid."

Americans should be aware of what could come if many economists are right and a housing correction is already under way or may soon develop. The typical pattern is a two-year drop in prices of 10 percent to 20 percent followed by a number of years of flat prices, according to Lehman.

That sounds a whole lot different from the sales pitch many realtors are tossing these days.