Housing starts, which are expected to plummet this year to 1.2 million units from 1.7 million in 1979, are likely to rise above 1.5 million in 1981, with prices for new housing rising 13 percent, Federal Home Loan Bank Board Chairman Jay Janis told a housing forecast conference here yesterday.
Although housing starts moved upward in recent months, they had fallen sharply early this year due to high borrowing rates. As a result, there will be some slackening in housing starts in the next several months but a rebound is likely in 1981, Janis said. He sees mortgage rates dropping from their current level of nearly 14 percent to below 12 percent next year.
Janis' predictions, made at a session sponsored by the National Association of Home Builders, generally were supported by other forecasters. Robert Sheehan, an NAHB economist, said that starts will be near 1.5 million in 1981 but that mortage rates will be near 13 percent.
Generally the erratice level of mortgage rates and this second surge over 13 percent in 12 months are seen as factors that discourage prospective homebuyers and make it nearly impossible for first-time young buyers to handle monthly payments.
Kenneth Rosen of the University of California said that savings and loan associations are supplying less mortgage funding because of declining deposits and also must sell loans they originate in a secondary market that tends to demand higher rates of return for investors.
While several speakers and conference attendees discussed the likely use of more variable-rate and shared-appreciation mortgages, Rosen predicted that the standard fixed-rate mortgage will survive but at a higher rate because of lender concern about continued inflation. Rosen blamed the competition for capital funds -- particularly by the federal government -- as a major reason for the prospect of continuing high mortgage rates.
In other housing news, Alfred Kahn, the president's adviser on inflation, and Lawrence B. Simons, assistant secretary for housing at the Department of Housing and Urban Development, announced yesterday that housing costs had been cut significantly in three experiments sponsored jointly by HUD and Kahn's office.
The demonstration project was set up in May to test whether variations in local government regulations could cut the cost of building single-family homes. Three of four demonstrations have been completed, with cost reductions of between $13,000 and $32,500, Kahn and Simons said.
The homes -- built in Allegheny County, Pa.; Hayford, Calif.; and Shreveport, La., were priced between 20 percent and 33 percent less than similar homes in their areas.
"This small demonstration, carried out with no federal funds and a very short startup period for planning, has produced significant results," Simons said.
"This kind of thing is exactly what regulatory reform is all about," Kahn commented.
Simons said that the savings could be duplicated across the nation.
The main savings came with speeding up on the processing of building applications. Other savings included allowing minor changes in the zoning rules of local governments and relaxing other rules governing the construction of the buildings. These still had to be safe, solid and sanitary, Simons said. But many of the present regulations are unnecessary, he added.