Housing sales in the Washington metropolitan area dropped by 21 percent in 1981 from their already depressed 1980 levels, as steadily rising interest rates continued to wash many potential buyers out of the market.

The battered state of the housing industry here was further reflected in a 30 percent decline in the building permits issued for new home and apartment construction. In 1981, 13,750 building permits were dispensed by Washington area governments, a significant decline from the 1980 figure of 19,710 permits, according to preliminary figures from the Washington Council of Governments.

Area home sales have plunged 33 percent in two years, according to figures supplied by suburban boards of Realtors and Rufus S. Lusk Co., a firm that publishes data on real estate transactions. There were 48,886 homes and condominiums sold in the area in 1979 but this figure fell to 40,642 in 1980 and dropped to 32,311 last year.

With sales sliding many sellers waited six months and longer for a sale and then settled for less money than they might have gotten in the past.

Sellers themselves became the major sources for mortgage money, with 60 to 70 percent of the 32,311 home and condominium sales last year totally or partly financed by sellers, according to several real estate officials.

"It is not that housing is not selling, but sellers have to be considerably more reasonable than in the past," said William Ellis of Shannon and Luchs. "They must be prepared to pay points a fee for placing a mortgage with a financial institution , help with the financing and perhaps reduce their price."

Condominium sales (1980's bright hope of affordable housing) fell in 1981 and memberships at area boards of Realtors declined. The All-Savers Certificate, which was to rescue the housing market, barely threw out a lifeline.

"It began to get bad in 1980 and it got worse in 1981," said Flaxie Pinkett, president of the John R. Pinkett Inc. realty company. "People cannot pay these kinds of interest rates. Middle income people are squeezed out."

Herman Methfessell of Long and Foster real estate company said, "The year seemed to start slowly then tapered off and ended badly. The problem is purely and simply interest rates. We are competing with our own government for money and interest rates are no object to them."

The year 1981 opened with traditional mortgage lenders (banks and savings and loans) offering interest rates at 15.4 percent. By December the rates stood at 17.50 percent after peaking at 18.24 percent in November.

That meant on a $100,000 house with a 30-year, $80,000 mortgage, the monthly principal and interest payments rose from $1,053 to $1,173 in 12 months--$1,440 more a year.

So buyers eschewed traditional mortgage lenders and turned instead to sellers.

"Owner takebacks dominated real estate sales," said James G. Banks, executive director of the Washington Board of Realtors.

There are two major types of seller financing: the seller holds either the first or the second mortgage on his home.

In the first instance the seller becomes the bank.

Traditionally, a buyer would make a down payment to the seller, borrow the remainder for a bank, give it to the seller and make monthly mortgage payments to the bank for 30 years. When the seller holds the first mortgage, which the bank used to hold, the seller receives a down payment but not a lump sum payment for the rest of the price.

Instead the seller receives monthly mortgage checks for usually up to 10 years. After that the seller can extend the mortgage or require the buyer to pay the remaining amount. If the buyer misses a payment or cannot pay the outstanding amount when it is due, the seller can foreclose.

In the second case, the core of the deal is an assumable Veterans' Administration or Federal Home Administration mortgage. These federally guaranteed assumable mortgages carry interest rates that are half as much as current rates and can be passed on to cash-pinched buyers.

Those mortgages helped keep the real estate industry afloat last year.

A seller can pass along this type of mortgage and the interest rate remains the same, usually between 8 to 10 percent. Then the seller usually gives the buyer a three-to-five-year second mortgage for the difference between the existing mortgage and the sales price, minus the down payment.

More than half of the 2.3 million homes sold in the United States last year involved the seller taking back the first or second mortgage, according to the National Association of Realtors.

Dwindling sales meant falling incomes for many real estate agents here.

"People are taking a substantial reduction in pay," said Methfessel. His company, Long and Foster, hired 100 new agents, but laid off 5 percent of its 130 salaried employes, he said. The agents are paid when they sell a home.