Don't let the financial hobgoblins that have been swirling through the American economy the past two weeks unsettle your real estate plans this fall.
On the contrary: Make the most of the stock market's volatility. Make the most of Wall Street's swings by grasping its special significance for real estate and mortgage financing.
Start with the cost of money. Prior to Black Monday, Oct. 19, interest rates were on a steep path upward. Within barely 30 days, fixed-rate home loans had gone from just above single digits to nearly 12 percent.
The short-term bank prime rate -- the index governing the monthly payments on many home equity loans -- had jumped three times. And the most important mortgage index, the one-year Treasury securities that control millions of adjustable-rate home loans, had surged to 8 1/2 percent, nearly one-third higher than it had been in the summer.
Wall Street's panic halted that upward rate spiral. With billions of dollars pulled out of stocks and put into Treasury bills and insured lenders' coffers, rates dipped immediately.
Subsequent public assurances by the Federal Reserve Board that credit would be kept plentiful throughout the economy pushed rates down even further.
What is the bottom line for you as a potential buyer, seller or refinancer? Although no one is giving it away, mortgage money is demonstrably cheaper -- at least one percentage point on average in competitive markets -- than it would have been otherwise.
Since economists calculate that every rate cut of 1 percentage point means that an additional one million-plus American households will qualify to buy a median-priced home, Wall Street's problems could have an immediate effect on you. That's particularly the case if you had been squeezed out of a purchase by rising rates earlier in the month.
The same could be true if you're a trade-up buyer or seller. What had been turning into an interest rate rout now looks like a real-estate reprieve, at least temporarily.
For the coming few weeks, prospects appear favorable for the continuation of an interest rate "window" -- an opening or pause in an upward trend that may well resume later in the season.
Rather than putting off the move-up purchase you'd planned, think hard about locking in a rate commitment now.
As James Christian, chief economist of the U.S. League of Savings Institutions, puts it, "If I were personally faced with the choice of borrowing mortgage money today or borrowing in January, I'd apply for it now and try to close before the end of the year."
That holds true for fixed- as well as adjustable-rate loans, in the view of Christian and other top mortgage economists. The long-term trend for the balance of the decade -- absent dramatic turnarounds in the nation's foreign-trade imbalance, federal budgetary deficit and falling dollar -- is for a gradual increase in rates.
Given that scenario, making the most of the current window makes a lot of sense.
Rate-capped adjustables, priced at a record three percentage points or so below fixed-rate competitors at the moment, appear to be the odds-on consumer choice.
Bear in mind, however, that if index rates are still higher next fall and the fall of 1989, your advantage over fixed-rate loans could evaporate.
So don't dismiss fixed-rate mortgages during the window because they carry double digits. Better yet, on new-home purchases, turn double-digits into single-digits by shopping for -- or insisting on -- two- to three-point "buydowns" (subsidies on fixed-rate loans) for three to five years.
Builders who didn't want to talk about buydowns a few months ago may gladly welcome you to their subdivision models this weekend.
What about real estate values in the wake of the financial market jitters? Are they potentially hurt when Wall Street sustains trillions of dollars of paper losses?
Although some television commentators have suggested we'll see value losses in "big ticket" expenditures such as houses, don't lose sleep over it. Except at the seven-figure level, residential real estate values are on a separate track.
The cost of mortgage money is the most critical component in the current national market equation, and that's been healthier for consumers since the panic than before. "Financing creates value," as the appraisers say. It's not the only major factor -- as Houston has demonstrated since 1984 -- but it's vital.
Even in so-called overheated markets, such as suburban New Jersey, Long Island, Connecticut and metropolitan Boston, don't expect unusual price cuts attributable to the market panic.
Home values, unlike the stock market, have an inherent stability that never have been -- even in the depths of the Great Depression or the 1980-1982 recession -- vulnerable to such mass hysteria as mid-October's Wall Street plunge.
After all, people live in houses. They play poker with stocks.