In the wake of the terrorist attack on New York’s financial district September 11th, the real estate world has come to a near halt.

Real estate agents report calls about property are down. Fewer people turned up at the open houses that weren’t cancelled., an Internet-based agent-finding service for home buyers and sellers, reported that the number of home buyers and sellers filing profiles on the system was down by 50 percent.

On the day of the attack, some buyers and sellers reported signing closing documents but not receiving funds until a day later, known as a “dry closing” in the industry.

Just before trading re-opened on Wall Street on Monday, September 17th, the Federal Reserve announced it would lower the federal funds rate (the rate banks charge each other to borrow money overnight) by half of a percentage point.

That is the eighth time this year that Alan Greenspan has lowered interest rates in order to stimulate the economy. But new information released in the week following the terrorist attacks shows that the economy has remained sluggish, and possibly slowed further.

(The events of September 11th won’t help a sluggish economy. Since then, major companies announced layoffs totaling more than 150,000, including 20,000 each from United Airlines and American Airlines, 30,000 from Boeing, 12,000 from Continental.)

The problem with lowering the federal funds rate is that most consumers won’t get any benefit at all from the rate drop. The interest rate that is directly affected is the prime interest rate, the interest rate banks charge their best customers.

For most consumers, the only way the prime rate affects them is if they have a home equity loan or a home equity line of credit that is tied to prime. The prime rate is now about 6 percent, which makes it extremely cheap to get a home equity loan or line of credit.

While most credit cards tie their interest rate to prime, most credit card companies also insert a floor, so that the rate can only fall so far. For most Americans who carry credit card debt, that floor was reached some time ago. So there is no benefit here either.

Another group of consumers that won’t benefit from an interest rate cut are those who live on fixed income securities – bonds. Many corporate bonds have been called (that is, paid off) and retirees have had to reinvest their principal in bonds paying less interest.

What many Americans are waiting for is for long-term interest rates to drop down another half to three-quarters of a point. At press time, a 30-year fixed rate loan could be had for around 7 percent, no points, or about 6.75 percent with just under one point. Lowering the long-term rate to 6.25 percent could bring a new round of home buyers out of the woodwork, as well as provide an opportunity for many homeowners to refinance their mortgages.

Despite the doom and gloom economic news, and tens of thousands of layoffs, lower long-term interest rates could bring some welcome relief to an overworked and overwrought economy.

The outpouring of grief over the September 11th attacks have struck home for real estate agents and lenders. Not only was one of the most visible pieces of real estate in the country destroyed in a matter of minutes, but our country’s financial center took a direct hit as well.

Real estate and finance companies have joined together to donate money to the relief efforts in New York. Fannie  Mae, Freddie Mac, the National Association of Home Builders, the National Association of Realtors, Mortgage Bankers Association of America, the National Multi-Housing Council, the Independent Community Bankers of America and the Homeownership Alliance have pledged a minimum of $25 million for the relief efforts.

As we went to press, more than $225 million had been raised in total for the relief efforts.

If you plan to donate to a relief effort, be aware that there are many scam artists trying to convince you (typically through an email) that you should donate your cash through them. Instead, stick with brand name charities that have promised to pass along 100 percent of what you donate to the relief efforts.

Two good places to go, though there are many worthy ones, are the American Red Cross and the United Way’s September 11th Fund.

Oct. 17, 2003.