If those breathtaking drops in mortgage rates from 17 to 12 3/4 percent have put you on the real estate sidelines -- waiting for 10 percent or below before buying or selling a house -- you could miss the entire ballgame this year.

Don't count on rates at savings and loan associations and banks to go below 11 1/4 percent to 12 percent anytime in the next months, and don't be surprised if they level off and start upward again.

The economic realities for mortgage lenders in 1980 make rates under 11 percent a virtual impossibility -- unless the economy takes a severe nosedive.

Nationwide, S&Ls currently have an average "cost of money" of 9 1/2 to 10 percent, according to data compiled by Dennis Jacobe, chief economist for the U.S. League of Savings Associations.

That means that when your neighborhood S&L averages out the interest it has to pay depositors on passbook accounts (5 1/2 percent), six-month money market certificates (which have been as high as 15.3 percent), jumbo certificates (16 percent and higher), 2 1/2-year and other certificates (10 percent or higher), the overall "cost" of deposits comes to just under 10 percent.

Some lenders whose new deposits have been almost exclusively in high-yield certificates are stuck with average money costs of 11 percent or more.

Since S&Ls typically don't make a profit unless they charge borrowers 2 percentage points above their own cost of money, you can see why mortgage rates can't fall as dramatically in June and July as they did in the first three weeks of May. Put another way, there is an unofficial floor for mortgage rates in the United States, which currently is around 12 percent.

As S&Ls take in new "cheap" dollars -- in the form of 9 percent, six-month certificates and passbook savings -- their average cost of funds will begin to drop slightly. Over the next three to five months, the cost of funds inside S&Ls could go to 9 percent -- making the unofficial floor for mortgage rates 11 to 11 1/2.

There's a complicating factor on the horizon, however, that you ought to consider if you're planning to buy or sell. Mortgage lenders report that consumers abandoned the housing market in droves earlier this year when rates hit 13 percent.

The reverse is likely to be true on the downslide: buyers will flood back into the market at 13 percent and below.

If mortgage lenders don't have solid months of savings deposits inflows in June and July, they won't have the money to meet this surging demand, and rates will level off or even head back up. That turn of events could catch some optimistic home buyers on the blind side, and knock them out of the market just as they were getting ready to plunge in. It could also make some of today's 12 1/2 to 13 percent rates look pretty good in retrospect.

In a nutshell, those are the factors shaping the mortgage market climate for the coming several months. What does it all add up to in terms of prudent planning for prospective buyers, sellers and refinancers?

If you've found a home for sale that fits your needs and you're holding back solely for lower interest rates, sit down and calculate how much per month you're really talking about. Assuming the lowest possible rate you'll see in the coming months would be 11 1/2 percent, how many dollars per month are you saving today by holding out?

On a 30-year, $50,000 loan at 13 percent today, the monthly differential between 11 1/2 percent is $58. That's not peanuts by any standard, but you've got to ask realistically whether it's large enough to risk losing a home you truly like, or risking a return to 14 to 15 percent rates and higher home prices later this year.

If you're a seller waiting for conventional rates to hit 10 or 11 percent before putting your house on the market, you run similar risks in a volatile economy. If you're in no rush to get rid of the property and have the luxury of time, by all means hold back for lower rates.

But if you need to sell within the coming several months, does it really makes sense to delay? Mortgage money is relatively plentiful, and rates already are low enough so that you may not need to assist a buyer with secondary financing.

If you're unlucky enough to have one of those 15 to 17 percent loans that S&Ls made to buyers in the past two months, you should definitely consider refinancing. The prepayment penalties vary widely from state to state -- as high as $1,200 on a $75,000 loan at 16 percent in California or Virginia, and as low as zero in Maryland or Illinois.

You'll also incur more closing costs in connection with your new loan. But the differential between a 16 percent mortgage and a 12 3/4 percent loan shouldn't take you more than 10 to 14 months to recoup -- and probably will be worth every penny of the initial expense.