Mortgage rates keeping everyone happy ... for now.

Alan Greenspan is on our side. As rates for 30-year fixed-rate mortgages have fallen to a new low, at 5.11%, residential brokers believe that the availability of cheap loans will keep the sales market hot for a little longer than expected.

According to George Stone, managing principal of Julia B. Fee Real Estate, the lowered mortgage rates will balance out the effect of skyrocketing prices. Sales in the residential sector have reached a plateau lately as buyers realize they can't go any higher on their bids.

"The stability of long-term rates will continue to help our local real estate market in terms of allowing people to afford the homes that have seen price increases," Stone said. "Lower rates will continue to help buyer affordability."

Stone thinks it unlikely, however, that the new numbers will contribute to further price increases.

"Short-term rates, which the Fed has tremendous amount of influence over, have risen and anyone using floating rates has been affected by this and their ability to borrow has been affected," he noted. "This may cancel out some of the benefits of the lower, long-term rates."

What brokers expect to see more of is demand from middle market buyers, the people who intend to use their real estate purchases as long-term homes, and an upswing in refinancing.

"What I have seen on the very high end of the market is that on re-sales there has been a little correction--some of the astronomical prices have reduced a little bit," said Michele Peters, director of sales and project development with Manhattan Apartments, Inc. "Our middle market will continue to remain strong as long as the rates continue [where] they are at now. New construction remains huge--it's very, very strong."

But while the lower mortgage rates might be good news for real estate brokers, many in the business feel they reflect the uncertain state of the economy. It would be hard to divine Mr. Greenspan's exact calculations, but the poor performance of the bonds market, high oil prices and lackluster employment growth are likely to be some of the reasons behind the decrease.

"I don't think anyone expected the [mortgage] rates to go down again; if anything, we expected them to go up a little bit," noted Toni Haber, senior vice president with Prudential Douglas Elliman. "They remained so low for so long, it's been three plus years. But interest rates are tied in with the bonds market, so the mortgage rate drop [probably] has to do with the bad economy and high oil prices."

At the same time, Michele Peters thinks that when figuring out Greenspan's strategy, people should pay attention to the state of the global situation. There has been a large influx of money from Asian and European investors into the U.S. real estate market and the Federal Reserve probably wants to encourage more of it. "People cannot believe that this market has continued this way for so long," she said. "But people need to be very aware of the global picture. There is a lot of purchasing from China and Europe. It's all about what's happening in the world."

Whatever the reasons for the decrease, David Sigman, senior vice president of LCOR--the national development and investment firm that specializes in large-scale multifamily residential development--doesn't think long-term mortgage rates are going to go back up any time soon.

"The yield curve is flattening--you are seeing higher interest rates on short term loans and lower rates on long-term loans, which means that ... inflation is [not] going to be an issue," he explained. "It all depends on how job production goes and how inflation comes in. It's too soon to say, but it would [probably] take a while before we see any change in that." Then there are those who think that once the rates start going up, it will be a real awakening for people who think the real estate market will remain strong forever.

"These are precarious times, to say the least, because people like Alan Greenspan are confounded by the treasury markets dropping the way they are," said Robert S. Nelson, president of acquisitions and management firm, Nelson Management Group Ltd.

"A lot of people believe [real estate] is a bubble that's just about to burst. I do think that when interest rates start to move north, they will [do so] at a rather fast pace--they have been low for so long now that once the bonds market starts to see signs of inflation, it might overreact.

"I know that I am a lot more jittery with what's going on out there."