Things that real estate agents find funny aren't all that amusing to Morgan W. McCall Jr.
"Realtors laugh at us when we tell them what we have to put down on a house," said the USC researcher and visiting professor, who has searched futilely for an affordable house in Palos Verdes Estates since his recent arrival from North Carolina. "Realtors say, 'When you win the lottery, come back.' "
Meanwhile, financial consultant Alison Gardner continues to sweat out finding a buyer for her one-bedroom condo in a fashionable East Side neighborhood of Manhattan. She put it on the market several months before the October, 1987, stock market crash and, even after lowering the price, hasn't had a nibble.
So it goes in the nation's topsy-turvy housing market. Would-be first-time home buyers in Southern California find it tough to break in as prices continue to soar. Yet owners of pricey condos in Manhattan can't seem to give them away as the region keeps reeling from last year's financial debacle.
And that is what makes predicting overall trends in home prices a challenge even for the experts. But there are some rules of thumb.
"House prices are generally a reflection of what the local economy is doing," said John A. Tuccillo, chief economist of the National Assn. of Realtors in Washington. "If you've got a strong economy, then house price appreciation will be good."
That, Tuccillo said, would indicate continued strong growth for a "super hot" region such as Southern California, which has a robust, varied economy. He is also seeing renewed strength in Rust Belt areas such as Buffalo, Detroit and Grand Rapids, Mich., which are benefiting from an export boom.
Housing markets are still weak in the troubled Oil Patch. In the Northeast, the market has flattened out after two to three years when house prices were bombing along at double-digit rates. (Gardner's Manhattan condo, for instance, has been listed with 23 brokers but has attracted only nine browsers, despite what she describes as a "very low price" of $170,000.)
Nationwide in the 1980s, prices in most parts of the country have lagged behind the inflation rate, after a decade of fierce growth in the 1970s when Americans began flocking to housing as an investment. The slowdown has caused concern that a collapse might be in the offing.
Back in August, Barron's, the business publication, created a stir with an article about the prospects for a collapse. In it, a team from Comstock Partners, a New York investment strategy house, contended that real interest rates and home prices are too high and consumers too deeply in debt for housing prices to keep rising.
The Comstock people are still touting that line, but these days they are lonely contrarians, and even they are reluctant to say exactly when the sky might fall.
"It's very hard to say categorically . . . that prices are going to move one way or another," said Michael Aronstein, Comstock's president. "In general, though, one thing I would say is that real estate, particularly urban real estate in and around financial centers, has become an object of speculation over the last five to 10 years."
The speculative bubble, he noted, is already bursting in some Eastern financial centers. Not long ago in Boston, he said, people were "sleeping out in front of houses and fighting to bid 10% over the asking price. All of a sudden it's frozen over."
In Manhattan, some of the stagnation is traced to last October's stock market crash, in the wake of which more than 20,000 finance jobs have been lost.
Most housing experts, however, say a decline in home prices nationwide is scarcely imminent. Leonard Sahling, manager of real estate economics for Merrill Lynch Capital Markets in New York, said he foresees prices nationwide rising in line with inflation for the next five to 10 years, with prices in California growing even faster.
"Home prices are not bound for collapse, but neither are they likely to soar as they did in the 1970s," he concluded in a recent report.
As for Southern California, most observers say the region's diverse economy will allow house prices to stay buoyant.
"The hard facts are that housing prices in California since the mid-1970s have risen well in excess of the inflation rate," said Joel S. Singer, chief economist for the California Assn. of Realtors in Los Angeles. "The reason is the strong economy and demand far exceeding supply. That pattern is likely to continue."
By the year 2000, an additional 5.5 million people are expected to take up residence in California, boosting the population to 33.5 million. (Of that rise, more than 1 million is expected in Los Angeles County, and Riverside County's population is predicted to climb by 724,000.) That increase, Singer said, will mean demand for an additional 250,000 housing units each year. Yet the region has been able to produce at that level only three times in the last 10 years, he said.