Terrorist attacks. Anthrax in congressional offices and various post office buildings. Airplane crashes.

We live in scary times, and the fear factor is starting to have an effect on what up until now had been the strongest part of the economy – the housing market.

Interest rates are at their lowest levels in more than 30 years. The first half of the year set new records for home sale activity. But the fear factor, driven by an undercurrent of recession and ignited by the terrorist attacks on September 11th, has caused many home buyers and sellers to pull back and wait until things settle down.

More than two months after the attacks, real estate activity is down 15 to 20 percent from where it was earlier in the year, and compared with activity during the same period a year ago. The natural slowdown of activity during the last six weeks of the year has the potential to erode these numbers further.

The one glimmer of hope was the Treasuries elimination of the 30-year bond at the end of October. Bond experts say Federal Bank Chairman Alan Greenspan is hoping to focus attention on the 10-year bond, which directly affects mortgage rates. He’s betting that by increasing demand for the 10-year bond, mortgage rates will go down, and loan refinancing activity will rise.

It’s possible that home sales will rise as well, but the first-time buyer market, which is the most interest rate sensitive, is already running at breakneck pace. The real winners may be current homeowners who plan to refinance. The extra cash in their pockets each month could provide a zip to the economic recovery – if they’ll go out and spend it.

In fact, economists are hoping that homeowners will lead the economy into recovery some time early in 2002. But that’s unlikely to happen if accidents and terrorist attacks continue to pop up.

Listing times have doubled in many metro areas, as home buyers have decided to wait rather than rush into a purchase. For those who have lost their jobs, or may lose them over the next few months, purchasing a new home becomes a whole lot less important than preserving capital. Home sellers aren’t as eager to trade up, and take on bigger debt in a volatile economy.

If you are planning to buy or sell over the next few months, here are a few tips that should help you get the best deal possible:

Home Buyers: There’s no need to rush. As sales slow down naturally this time of year, there are many more houses available for sale than there were six months ago. And, not as many buyers will be competing for each home.

Take the time to compare recent sales (preferably since September 11th), to see if your local market has reacted with price reductions. Get to know the neighborhood, and visit local open houses to see what kind of housing stock is available (always sign in as a client of your buyer broker to protect yourself from a dual agency situation).

When making your offer, be sure to take into account the appreciation of the past few years, and local economic conditions. If prices have appreciated annually at double digit rates, but now half the community is jobless and "for sale" signs have sprouted up, you will not want to over pay for your new home.

Home Sellers: Price and condition are everything in a slower market. If you have your eye on the price your neighbors received six months ago, you could wind up making an expensive mistake. These days, overpriced homes won’t get a second look. The market has changed and the sooner you realize that, the better you’ll be able to react.

Start by hiring an aggressive agent who has a full-developed marketing plan. This marketing plan should include advertising, several broker’s open houses, and Sunday open houses for consumers. If you are selling a condo and the target market are working couples, you may want to press for a week night showing that buyers can stop by after work in addition to regular open houses.

Always counter every offer, even if you don’t come down much. Home buyers may throw out a low bid, but then might come up substantially if you don’t move much off of your list price. Still, you’ll have to negotiate. Figure out whether you’re willing to let the buyer name his or her closing date as a way to keep the price as high as possible.

Make sure your home is in as good condition as possible, so that there’s little if any room to negotiate after the home inspector has come through.

Finally, be patient. Homes are still selling, but it’s taking longer. If you haven’t received any interest in 30 to 45 days, consider lowering your price.