Optimism about real estate trends hit a brick wall this fall, the Federal Deposit Insurance Corp. reported Monday.

The agency takes the pulse of real estate markets by polling examiners and liquidators quarterly and then converting their responses into an index score. From July to October, the index plummeted 15 points, to 62-the lowest since January 1996. Commercial property markets scored a 61, down 14 points from July, and residential real estate fell 17 points, to 62.

These are dramatic changes; during the last year the index had changed an average of 3.25 points per quarter. Still, any score above 50 indicates that more regulators said local conditions were improving than deteriorating.

Cynthia Angell, a financial economist at the FDIC and the study's author, played down its results. "We interpret it more as leveling off rather than any start of deteriorating conditions," she said.

Bank economists saw the change as a positive sign that a period of heavy real estate lending might be coming to an end.

"I think it's a good thing," said James Chessen, chief economist at the American Bankers Association. "It's always good to have time periods where there's an abundance of caution rather than an exuberance to lend."

"It could stop an excess occurring down the road," agreed Diane C. Swonk, deputy chief economist at Bank One Corp., Chicago.

The 295 senior examiners and liquidators surveyed by the FDIC in late October gave the real estate market its lowest overall score since January 1996, when the index hit 60. The survey was at an all-time high of 79 in April.

The FDIC did not explain what caused the shifts in perceptions, and bank economists offered differing explanations.

"It might have been a knee-jerk reaction to the financial turmoil this summer abroad, which triggered a tightening of credit conditions across the board for higher-risk lending," said Ms. Swonk.

Stuart Hoffman, chief economist at PNC Bank, Pittsburgh, said the change in commercial real estate markets had probably resulted from the widening of spreads on mortgage-backed securities.

Economists were uniformly surprised by the figures on residential real estate markets. "The data we're seeing from home builders are still quite strong," said Mr. Hoffman. Mr. Chessen said the ABA's economic advisory committee also considers residential markets "strong."

Separately Monday, the FDIC reported a "slight increase" in the riskiness of loan underwriting by state nonmember banks.

According to the agency's semiannual underwriting report, 12% of FDIC- supervised banks took above-average risks during the six months that ended Sept. 30 and actual lending practices differed significantly from written policies at 6% of the banks.

The FDIC report was based on questionnaires filled out by supervisors after completing bank exams.

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