The nation's housing market, which was beginning to cool off even before the dramatic stock market downturn in October, now appears to be in a position to handle some economic nasty weather and do moderately well in 1988.
Without ignoring the obvious effects of damage to consumer confidence in the wake of the Wall Street bad news, many housing observers in the nation's capital agree with Ryan Homes' executive Charles Langpaul that there's an increasingly strong tendency for some uncommitted potential home buyers to "wait and see" for a while. However, he added that "it is not a big problem for customers we are talking to."
Michael Carliner, an economic specialist with the National Assn. of Home Builders, takes the view that many large houses have been sold in recent years to persons who have profited strongly in the stock market, noting that 26% of all homeowners own stocks and that half of the mortgaged homeowners with incomes over $50,000 are also stockholders.
NAHB recently revised downward its forecast for 1988 starts to 1.45 million, quite a cut below the projected total of 1.64 million starts likely to be tabulated for 1987.
And here's where the paradox develops.
Even before the stock market downturn, housing experts were forecasting a downturn in starts for 1988--mainly because long-term mortgage rates were increasing and because prices of both resale and new houses had literally gone through the roof.
Therefore, the good news must be balanced against the bad. As housing veteran Edwin L. Stoll noted: "Already we have seen the VA and FHA mortgages rates come down by one-half percent and there's more than an even chance that borrowing rates will decline a bit more."
But what may be even more important to the overall housing industries is that the upward spiral of "asking" prices has been slowed and has turned back down.
Washington-area builder Robert Libson took the optimistic view that the stock market flop provided a strong bit of evidence that the soundest investments are in real property.
"If you want to put it that way, both stock and housing prices have been much too high in the past few years," he said. "However, most home prices have held fairly firm, except where some owners have put excessive price tags on fairly new houses. But the current comparison is highly in favor of owning a house or commercial property, without even considering the tax advantages."
Timothy Howard, chief economist for the Federal National Mortgage Assn., noted that any negative credit aspects of the stock market fall-off will be heavily "regionalized." While noting that the financial markets can be expected to become more volatile, Howard said housing should benefit from lower mortgage rates and that owner refinancings may become popular again.
U. S. Home, one of the nation's largest volume builders, reacted quickly to the stock market shakeout by informing all local and regional managers to abandon speculative building and to begin a policy of starting a new house only when a buyer has put down a decent deposit. This tactic avoids costly holding of unsold houses whenever the market shows signs of softening.