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Realtors Celebrate Record 1986 Amid Concern for Next Year

October 05, 1986|DAVID W. MYERS | David W. Myers specializes in the business aspects of real estate

SAN DIEGO — As realtors gather here this week to celebrate the best California housing market in six years, they also are thinking about potential problems that could put a damper on sales in 1987.

Their concerns certainly aren't great enough to throw a wet towel on the near-carnival-like atmosphere surrounding the California Assn. of Realtors' 82nd annual convention at the Town & Country Hotel.

Along with the training sessions and exhibits, there also will be the usual collection of parties, dinner outings and shows. As one local realtor puts it, the annual gathering "is the one chance a year we have to celebrate, kick back and have a good time--and maybe learn something while we're at it."

Indeed, realtors have good reason to celebrate. Sales of existing single-family homes in California are running far beyond last year's pace. The 428,000 homes CAR expects will be sold by the end of this year would be 5% above last year's level, making 1986 the best year for home resales since 1980.

Joel Singer, the trade group's chief economist, predicts 1987 will be nearly as good: He thinks sales will ease only about 5% from this year's torrid pace. The modest decline is expected because some pent-up demand has been satisfied by the prolonged drop in interest rates.

"We'll see a very good market next year," Singer says. "It won't be quite as good as this year, but it'll still be quite good."

But 1987 will have its share of problems as well. CAR and its 105,000 members across the state are girding for another battle over what the trade group's president, Venice realtor Richard J. Rosenthal, has called the Reagan Administration's "assault on the American dream of homeownership."

In particular, the realtors are irked that the problems that plagued the Federal Housing Administration this year will likely hobble it again in 1987. That would mean the agency would once again operate until it reaches its credit limit, and then be forced to close its doors until Congress and the president agree to put it back in action.

The FHA had to shut down several times earlier this year, and sometimes had to wait weeks before it could resume operations. At the height of this year's sales activity, Rosenthal said, the closures meant that "9,000 California households every day had to search for other forms of financing, delay, or forget their home-buying plans."

FHA guidelines prevent the agency from insuring mortgages that exceed $90,000. As a result, the program is particularly popular in Central California, the Inland Empire and other areas where home prices are well below statewide averages.

The fact that FHA could be in for another on-again, off-again year "concerns" Judy Thompson, president of the Sacramento Board of Realtors and a broker in Citrus Heights.

"If we have another year of temporary shutdowns, I think some people might get a little gun-shy of being involved with FHA," says Johnson, whose area is one of the biggest users of the program in California. "Sellers might not want to sell to FHA buyers because they'll be afraid their deal will hit snags."

Another potential statewide problem is the rising cost of private mortgage insurance. Many lenders, as well as "secondary market" agencies such as the Federal National Mortgage Assn., require borrowers who make small down-payments to buy policies that guarantee repayment from private insurers in order to get the loan.

"Loans where you put down 5% are virtually unavailable because insurers' guidelines are overly restrictive," says Connie Stoddard, a Contra Costa realtor and chairwoman of CAR's real-estate finance committee. "We hope to get (insurers) to loosen up a little."

But while potential FHA and mortgage-insurance problems would affect most of the state, realtors in almost every region of California are preparing to tackle their area's own set of unique problems.

In the Bakersfield area, for example, the housing market has been hurt because the oil industry--one of the region's biggest employers--is still reeling from slumping prices and sluggish demand. Thousands of residents have lost their jobs. Bakersfield's sales rate and home-price appreciation will likely continue to underperform statewide averages next year unless the oil industry rebounds, some brokers concede.

"We've got our share of problems, but we're still upbeat about the rest of this year and 1987," says Ken Swanson, president of the Bakersfield Board of Realtors. He says local salespeople are taking part in the city's efforts to lure new business into the area, and that the region is becoming home for thousands of people who can't afford--or don't want--to buy a home in Los Angeles or surrounding areas.

Realtors in the mountain resort of Big Bear hope that the tax-reform jitters that hurt their market in 1985 and earlier this year will be a thing of the past by the time next year begins. Sales in the area dried up when Congress and the president pondered reducing or eliminating write-offs for second or vacation homes.

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