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Rosy Housing Picture Seen for First Half : Builders Credit Lower Interest; Forecast for Latter '85 Still Hazy

January 13, 1985

Currently favorable interest rates promise a good half-year for housing in 1985, but the outlook gets hazy for the second half of the year because of uncertainty as to the course of those rates, according to several Southland builders who expressed their opinions in a random survey.

"We think interest rates are at, or very near, their bottom," said Ira Norris, president of the Building Industry Assn. of Southern California and also of Upland-based Inco Homes, which has sold 450 houses in the Victorville area since 1981 and is currently training its sights on Lancaster.

"Housing sales will be strong in the first half but the remainder of the year is a question mark," he said, adding, however, that he thinks San Bernardino, Riverside and northern Los Angeles counties will continue to prosper throughout the year.

San Bernardino Favorable The San Bernardino area is also favorably regarded by Randall Lewis, senior vice president and marketing director of Lewis Homes, also based in Upland. The company is developing a score of Southland projects, including the $1-billion mixed-use community of Terra Vista in Rancho Cucamonga where 200 homes have been sold in the past four months.

"Attractively priced land, good governmental-private sector relationships and an excellent labor force all contribute to the Inland Empire's optimistic outlook," he said. Lewis also looks for growth in the Interstate 15 corridor north of San Diego but warned that such accelerated activity may result in a shortage of skilled labor in those two areas.

A differing opinion--that interest rates will hold for most of the year at the present level--was expressed by Bruce Wachtler, assistant vice president/real estate operations of Sears Savings Bank, Glendale, whose company builds for its own account and also joint-ventures with other builders.

"Nevertheless," he said, "the basic forces of demand and supply will prevail. San Diego, Riverside and San Bernardino counties will be the most active, yet good opportunities exist in mature markets like Los Angeles County as well as newer markets in Santa Maria and Lompoc.

"It is vitally important that permanent financing be made available by the builder to buyers."

Cathy Greenwold, vice president of Calprop Corp., Los Angeles-based, publicly held building firm, said, "We will be looking for niches in Los Angeles urban areas that lend themselves to move-up detached homes as well as entry-level town-house products.

"Orange County, northern San Diego County and Thousand Oaks will be other prime target areas for residential development in 1985."

From a marketing viewpoint, builders can be expected to start readdressing buyers in more conventional merchandising terms, in the opinion of N. Richard Lewis, president of the advertising and public relations firm of Lewis & Associates, which has been involved in the marketing of more than 35,000 homes in the past two decades.

"Financing terms have been the primary thrust of most merchandising in the past couple of years," he said, "but with interest rates now at an acceptable rate, we can expect more emphasis on value ratios, emotional factors and square-footage comparisons.

"The astute merchandisers also will take advantage of the current low interest rates by supplementing them with other incentives to attract the borderline buyers, those who can just barely qualify.

"This segment of the market may be lost by the third or fourth quarter of the year, when interest rates may well be on the rise again."

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