As interest rates have increased, mortgage refinancing has slowed down, hurting companies such as Washington Mutual (NYSE:WM), which recently warned that earnings would come in below expectations. But the bubble that I have argued exists in the U.S. real estate market shows no signs (yet) of bursting.

Home prices have continued to increase, and the rate of price increases also continues to accelerate. The Office of Federal Housing Oversight recently released its house price data for the first quarter of 2004. U.S. home prices rose 7.7% over the first quarter of 2003.

Further, the rate of price increases has been steadily increasing since 1990. The 7.7% yearly price increase in the latest quarter is greater than the 2000-2004 average of 7.3%. And the average yearly price increase since 2000 is higher than the average for the second half of the 1990s of 4.0%, which is in turn significantly higher than the average of 1.9% for the first half of the 1990s.

Activity and interest in real estate also appears to be heating up on Wall Street. In the last few months, both Citigroup (NYSE:C) and Merrill Lynch (NYSE:MER) have announced plans to develop large real estate funds and high-profile hires to head the new funds. The activity on Wall Street in real estate is reminiscent of the atmosphere at the height of the Internet stock bubble, when every Wall Street firm had to have its own Internet fund and when high-tech analysts were treated as superstars. With Internet-like hyperbole, recently reported that "Raising real estate funds is all the rage on Wall Street this summer."

Finally, housing stocks such as KB Homes (NYSE:KBH), D.R. Horton (NYSE:DHI), Lennar (NYSE:LEN), or Centex (NYSE:CTX) continue to remain strong. Over the last 12 months, despite the changing interest rate environment, all four stocks are up, and three of the four have outperformed the S&P 500.

All of this indicates to me that the real estate bubble is alive and well. Like all bubbles, it will eventually burst. The longer and bigger it grows, the more painful the bursting will be.

Fool contributor Salim Haji owns a home in Denver, Colo., but does not own any of the stocks mentioned in this article.