Price increases on new houses for sale in the metropolitan area are expected to increase about 15 per cent within the next six months, according to housing sources.
"Basic costs went berserk in 1977," builder Michael T. Rose told a marketing seminar here recently. He added that construction costs increased about 20 per cent last year for area builders but that most prices of new homes were increased only 10 per cent.
As a result, Rose and other builders and sales executives agreed that prices are likely to increase more markedly this year. At the conference sponsored by the Northern Virginia Builders Association, housing statistics executive William Regardie predicted thatmost new home prices to consumers would be about 15 per cent in the first six months of this year.
Regardie suggested that sharp increases in prices could "kill the currently hot housing market in this area," despite a low inventory of unsold homes and a strong consumer response in the past year. He suggested modest price increases in steps rather than precipitious increases at one time.
Meanwhile, housing economist Michael Sumichrast said that he has informed builders throughout the nation that new savings coming into thrift institutions declined increasingly in the last four months of 1977. He said net savings in September were 24 per cent less than in that month in 1976; in October, 32 per cent off; in November 44 per cent lower, and down 68 per cent in December.
Sumichrast, who is a staff vice president of the National Association of Home Builders, said in an interview that the thrift institutions, mainly savings and loan associations, made loans totalling $9 billion in both October and November - about 40 per cent more than the levels of a year earlier. "There is no way the thrift institutions can continue to lend money at record levels under these conditions," he added.
He also said that thrift institutions had a net savings inflow of about $39 billion in 1976, but that figure dropped to $34 billion in 1977 and is expected to fall to $20 billion in 1978. "Obviously, we cannot have a record mortgage lending year with this critical change in the savings picture," he commented.
While several area housing specialists reported good sales in traffic in the latter weeks of 1977, they expressed anxiety about the effects of higher interest rates that now range between 9. 25 and 9. 5 per cent in this area.
There are widely varying housing start predictions for 1978, ranging from 2.1 million to 1. 8 million John C. Opperman, president of the Mortgage Bankers Association of America, came in with the high estimate, and housing industry sources see 1978 starts being about 170, 000 less than the likely total of 1. 97 in 1977. Most of the predicted decline is expected in single decline starts.
Nonetheless, Sumichrast predicts an upturn in both single and multi - family (rental) starts in metropolitan Washington in 1978, with the estimated total of 28,000 or nearly 3, 000 more units than were started in 1977.
Additionally, Sumichrast has warned of the strong possibility of overbuilding in Fairfax County this year. He said that reports from county development officials indicate there could be as many a 15, 000 new homes started in Fairfax this year. "That's more than double the normal absorption in the market," Sumichrast insisted.
However, other area building prefessionals commented that the area market has been strong in Fairfax, in contrast to Montgomery and Prince George's counties which have suffered a shortage of lots with available sewer and water service.
Another problem facing area home builders and builders is and increasing shortage of skilled workmen and laborers. Sumichrast warned that shoddy construction could turn off the new wave of young buyers. And a Maryland builder cited an experience of having two laborers making $4 a hour being lured off his job by a competitor who offered them $7 an hour to do carpetry work.
Generally, 1977 was regarded as a strong 'turnaround year' for all kinds of new housing in this area. Data specialist Ronald Glass told marketing prefessionals that sales of single houses and town houses increased 38 per cent here in the first 11 months of 1977 and that condominium sales moved up 17 per cent. He added that March was the bigest month for sales, with 1, 870 transactions completed for new singles and town houses.
One deterrent to area builders who might be tempted to build ahead of the pace of solid sales contracts is a memory of the 1973 housing market. It has been recalled that the pace of buying new and resale housing escalated considerably in 1972 and reached a high peak in the first half of 1973. However, at some point in the late spring, the total market collapsed. Most analysis saw it as the natural aftermath of a feverish buying period combined with the effects of much higher prices and a shortage of mortgage funds at what then were considered high interest rates.