With the unprecedented shocks on Wall Street and the financial sector still pulsing through the national economy, it's difficult to predict just how all this will ultimately affect real estate.

But so far at least, Wall Street's troubles aren't creating immediate problems for home buyers, sellers and real estate professionals. In fact, conditions actually appear to be improving.

Take the mortgage market: Rates continued to drop last week and applications for new mortgages were up sharply -- by 33 percent. Thirty year fixed rate loans dropped to 5.8 percent in the latest survey by the Mortgage Bankers Association, and hit 5.4 percent for 15-year loans.

Rates are now just half a point above the 40-year lows they hit in 2003 and 2004.

Of course there's a flip side here: Money may be cheap, but qualifying for it has gotten tougher in the last six months. Many lenders now want to see higher credit scores and bigger downpayments from home buyers -- and application turndowns are on the rise.

But consumers don't seem to be over-reacting to all the confusing news: The latest national consumer sentiment poll by the University of Michigan registered a surprising 10 point jump in early September -- that was the biggest increase since January of 2004.

The same survey found that consumers' expectations of where we're headed in the economy -- a key index that has a direct connection with people's willingness to consider buying houses -- rose by 13.1 points, the biggest since 1991.

And here's another surprise: Even home builders -- who have taken some of the hardest hits in real estate in recent years -- see things looking up! After years of declines, the National Association of Home Builders/Wells Fargo builder confidence index took a positive turn in the latest month.

The association said that half of all U.S. builders now see their local markets as having bottomed out and primed for improvement.

That may sound like wishful thinking, but it's a change in perception that we shouldn't ignore.

New home building starts haven't been affected by those rays of optimism, however, they were down by 6.2 percent in September, according to the Commerce Department.

But then again, that's okay too, because with a 10 month glut of new houses sitting unsold nationally, we don't need a big burst in new starts until the unsold inventory gets burned off.

So all in all, given the earthquakes underway in the financial system, things look surprisingly positive.

Published: September 23, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.