New-home sales have sagged here recently, indicating that the home-buying market is merely steady and stable rather than sensational. Sales figures compiled by Housing Data Reports show pent-up housing demand to be less than in early 1986.
Also, condo sales are virtually stagnant, except for a few well-located and priced offerings. In 1986, nearly 31,000 new dwelling sales were made in the national capital area, and the 1987 total is estimated by HDR to be about 29,000 to 29,500. Why? Considering some stiff price increases last year, the "buy anything" days are gone for awhile.
Other observations on the Washington area housing and real estate scene:
--Veterans are buying homes in record numbers. In fiscal 1986, nearly $22 billion in loans were guaranteed by the Veterans Administration for the highest total in the program's 42-year history. That amount covered 300,000 transactions.
The demand for VA loans shot up significantly after a drop in its interest rate to 9 1/2% in March, 1986. Currently, the VA mortgage rate ceiling is down to 8 1/2%, the lowest level since 1978.
--Multifamily housing starts are expected to drop more than 20% from the 532,000 rental units started in 1986--mostly for two reasons. First, tax reform diminishes developer interest in building income residential properties. Second, the demand for rental dwellings has declined in recent years due to the swing to home ownership as result of lower mortgage rates and home buyer mortgage interest and property tax deductions.
--More home builders are planning to produce larger, more expensive houses because they are convinced that there are many more move-up than first-time buyers in the market for new houses. People who already own homes usually have nice appreciation, depending on the number of years in the dwelling. Often two-income households are eager to have something better and also likely to be enchanted by the prospect of a larger mortgage at a lower-than-present rate of interest. And all the interest on any new mortgage is tax deductible.
--Mortgage rates are beginning to firm up, but there may be a slight decline through early summer. And some forecasters now are warning that mortgage rate levels may soon stabilize and move upward slightly by late summer. However, realtor Joseph C. Murray warns that could be wishful thinking on the part of lenders because the demand for housing loans is expected to decline generally this year--and particularly after June 1.
--Sen. Lloyd Bentsen, the Texas Democrat who now heads the Senate Finance Committee, has informed the multifamily housing industry that he supports a change in the passive-loss provisions of the Tax Reform Act of 1986. However, Bentsen has also let it be known that he favors passage of a trade bill before technical corrections to tax reform are tackled. Rental property investors are regarded as passive participants, and no longer allowed to deduct rental property losses against other income.
--A new three-year, rate-capped adjustable rate mortgage has been introduced by the Federal National Mortgage Assn. and its appeal is expected to be significant. Why? The new ARM features below-market initial rates like all ARMS, but the initial rate is locked in for at least three years, with a rate increase limit of only 2% per adjustment period and a 6% life-of-the-loan interest increase ceiling. Realtors suggest that interested clients ask about the availability of these new ARMS available for either 15- or 30-year terms.