The Washington Scene

Builders Predict Decline

January 06, 1985|JOHN BETZ WILLMANN | Special to The Times

WASHINGTON — Despite some dour predictions for 1984, the nation's housing industries involving the building and selling of new houses and home resales continued the strong rebound of 1983.

But what about 1985? Will it go the way of all flesh and stumble into mediocrity or will the continuing decline in long-term mortgage rates stabilize below 13% and produce another strong housing year? At latest count, new home production was expected to exceed the 1.7 million figure of 1983--with sales keeping pace with construction. Resales, meanwhile, once again are nearing the high annual level of 3 million units.

Nevertheless, the often dour National Assn. of Home Builders has come up with a projection that new home starts in 1985 will decline more than 15% to the 1.5 million range. Although it seems reasonable to project that starts in the overbuilt Dallas area will drop 19% after a decline of 26% in 1984 from an unrealistically high mark of 112,000 starts in 1983, it is neither realistic nor sensible to project, as the builder group has done, that the Los Angeles-Long Beach area new home starts will decline 3% in 1985 and drop to the 32,000 level after enjoying a 21% upsurge in 1984 from a depressed level of 27,300 starts in 1983.

And why should home starts, which increased a whopping 32% in Anaheim-Santa Ana in 1984, increase only 6% in 1985 to the 18,000 level?

Even more incomprehensible in view of mortgage rates that declined moderately but consistently in the latter part of 1984 is the home builder association prediction that housing starts will decline 18% in this economically virile Washington, D.C. metropolitan area where the unemployment rate is always well below the national average that now is below 7.5%. Hereabouts, housing starts increased 4% in 1984 over the strong level of 31,800 starts in 1983.

Veteran Washington builder Michael Rose commented that 13% long-term, fixed-rate mortgages are acceptable to many first-time buyers of his moderately priced houses. Bruce Leinberger, the U.S. Home executive in this area, added that the pent-up housing demand is now being satisfied and that a stable level of mortgage rates in the 12% to 13% range will bring out more buyers in 1985.

A continuing mild decline in mortgage rates should make home ownership of existing dwellings more attractive in 1985, according to the National Assn. of Realtors. This lower level of mortgage rates, along with a very modest rate in overall inflation, is expected to increase home values as much as 5% this year.

As a result, one high-placed realtor added that people who have plans to purchase a dwelling for the first time will be wise "to make a housing purchase soon, rather than wait" for resale home prices to increase in 1985.

On the area-wide and national rental housing scene, metropolitan Washington rents increased in a range from 4.5% to 8% last year. However, D.C. rent controls expire in March and any new legislation is likely to exempt higher rents in luxury buildings from further controls. New construction of rental properties has been slow here in recent years but there has been a concomitant increase in rehabing of the many 20-year-old garden apartments that have been sold to syndicates.

Joseph C. Murray, top executive of rental property management for the big Shannon ' Luchs firm here, said that the federal government's effort to get out the housing business will stimulate several demonstration programs aimed at selling public housing to tenants. Murray said this procedure has worked well in England and may work here too.

If the national deficit is brought under control by the president and congress, local realtors and home builders foresee a continuing strong housing market through 1985. At the moment, they fear that new and resale home-selling markets will overheat this spring and overload the demand for mortgage credit to the point that interest rates will move upward beyond the 14% level before the summer doldrums hit the housing business.

The 1985 home selling market strength will become apparent during the January-March outpouring of new home buyers and the February-April demand for resale houses that are put on the market by owners making a decision to move up to newer, more expensive houses. The first five months of the year determine how housing will do because the bulk of new home decisions and most of the resales occur before June 1.

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