Though interest rates have been falling since the beginning of the year, consumers are not ready to buy homes and big-ticket items, industry observers say.

The reason: A lack of confidence in the economy.

"People are in a hunker-down mentality," said William D. Dallas, president and chief executive at First Franklin Financial Corp., San Jose, Calif.

According to the Mortgage Bankers Association of America, home mortgage applications were down 7.3% for the week ended June 23.

Experts say consumers are trying to sort out conflicting economic messages about interest rates, jobs, and the housing market. While rates are appealingly low, many consumers appear concerned about weakness in the economy and the implications for job security.

"Consumers are really mixed up right now," said Rick Cossano, an executive vice president at Countrywide Funding Corp., Pasadena, Calif.

As a result, he and others said, consumers are sitting on the sidelines, waiting for a long-term economic trend.

Mr. Dallas of First Franklin Financial said with so much uncertainty, many consumers are locking in loan prices with more than one lender, and waiting until the last minute to see where they get the best interest rates.

Lending competition is stiff, he said, as job jitters cause would-be borrowers to pull back.

The overriding economic indicator that predicates a home purchase is employment, he said. The more confident potential borrowers are in their ability to repay a mortgage, the more likely it is that they will purchase a home, he said.

David Berson, chief economist of the Federal National Mortgage Association, agreed that employment is the most important determinant of home sales. It is even more important than interest rates, he said.

"If labor activity goes up, home sales go up regardless of interest rates," Mr. Berson said. If people are confidant they will have a steady job for a while, he said, they will feel more comfortable with a major purchase like a home.

Some markets have shown promise despite fluctuating levels of interest rates and consumer confidence, said First Franklin's Mr. Dallas.

He said first-time homebuyers, and especially low- to moderate-income borrowers, tend to ignore economic trends signs and buy when they are ready, he said.

He said lenders were pushing into these markets now more than ever.

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First Tennessee National Corp. announced it had completed its purchase of the loan-making operations of HomeBanc Mortgage Corp.

First Tennessee, based in Memphis, paid about $7 million for HomeBanc, the largest home lender in Atlanta.

First Tennessee originally announced its plans to purchase the small mortgage bank last month. HomeBanc had previously sold its servicing unit to Carolina First Corp., Greenville, S.C., for $13 million.

HomeBanc originated $600 million of home loans last year. In addition to an originations staff of 160 in Atlanta, HomeBanc maintains offices in Orlando and Deerfield Beach, Fla.

"HomeBanc's position in one of the nation's leading markets is an important addition to First Tennessee's strong national mortgage banking business," said Ralph Horn, the bank's chief financial officer, in a press release.

First Tennessee has total assets of $10.9 billion. It originated $6.6 billion of residential loans last year and serviced a $14 billion portfolio.

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