If 1981 was the year of the plague for the housing industry, 1982 is likely to be the year of slow convalescence.
The housing market will improve somewhat from its depression of 1981, but it still will not be healthy and could suffer a relapse at the end of the year, housing economists predict.
The path of mortgage interest rates, on which revival depends, is seen forming a crooked smile across the year's chart: First a decline from current rates that range from 15 1/2 to 17 percent to a low point of perhaps 14 percent in the middle of the year, but later soaring again--perhaps to new record highs. This would mean another decline in housing at the end of this year, after stirrings of recovery in the first half.
Pent-up demand is high--and prices leveled off in 1981--because soaring interest rates kept so many people from buying. As rates drop toward 14 percent, many housing experts believe a surge of buying will take place.
But the result may recall the fate of a Damon Runyon stool pigeon, trussed so that the harder he struggles the tighter his binds become. The increased demand for mortgage money--from homebuyers as well as business and the federal government--could tighten the credit markets and make rates rise, choking off the housing revival.
The administration says relief is at hand, relying solely on its policies to pull down inflation and interest rates. In a time of budget austerity, the housing industry and prospective buyers can expect little or nothing in the way of direct federal assistance in dealing with their plights.
Signs of a slight upturn have appeared in recent sales, starts and construction statistics, and many analysts believe the housing market finally hit bottom for this cycle around November. New house sales, as reported by the Commerce Department, rose 11.3 percent in November after a continual three-year fall, offering hope that declining interest rates were helping dig the industry out of its trough. The same month, housing starts and existing-home sales stayed basically flat. Both remained well below year-earlier figures.
Interest rates have started dropping, from a peak of 17 1/2 to 18 1/2 percent around October, according to Department of Housing and Urban Development figures. Precise mortgage rates at any one time are difficult to pinpoint because they vary according to the type of loan, housing experts warn.
Housing economists are not radiating much joy over the rate declines, and several expect rates to be at or near record highs again a year from now.
Jack Carlson, chief economist of the National Association of Realtors, predicts interest rates will rise sharply next winter, after descending to a low of 14 to 15 percent this summer, because the federal government refinances its ever-growing debt in the fourth and first quarters of the year, putting more demand on credit markets.
Thomas Harter, Mortgage Bankers Association chief economist, also predicts that mortgage interest rates will "once again be well on the way toward new record highs" by the end of this year.
But both Carlson and Harter argue that the next interest-rate spiral will not hit the housing industries as hard as it did in 1981, because people are becoming inured to rates that a few years ago would have seemed unimaginable.
"People are getting used to the rates. Fourteen percent is a bargain rate now," Harter said. With all the demand, sales "can't stay that low that long," he added.
"The clobbering effect won't be as great next time," Carlson agreed, because people will be more familiar with unusual financing schemes. "But that doesn't mean housing will do well," he added.
Sales of existing homes at the end of 1981 were at an annual rate of about 2 million units, just about half what they were three years ago at the peak of the latest cycle. Carlson forecasts that sales will rise to 2.5 million in 1982 and to perhaps 3.5 million in 1983.
Michael Sumichrast, chief economist at the National Association of Home Builders, sees two possible scenarios for the year, neither of them ideal.
Either the economy will crash so far and unemployment will be so high that interest rates will fall and stay down, leading to an improvement for housing in the second half of 1982, or interest rates will go into another round of increases, leaving the market at best only marginally better for the year as a whole than in 1981.
Starts of construction in 1981 totaled about 1 million homes, also just about half the 1978 level, according to the home builders' association. For 1982 most forecasts on housing starts hover around 1.2 to 1.3 million units, which would still be one of the lowest annual figures in three decades.
But Sumichrast said revised figures on the federal deficit have shocked many in the past few weeks, and that builders now generally believe 1 million starts in 1982 is an optimistic figure. It will take a long time for the home building industry to recoup, in any event, after its decimation in 1981, and there are large amounts of unsold inventory available when demand finally revives, he points out.
With home sales at their lowest postwar level in 1981, prices stabilized and even began to decline, particularly when sellers' financing concessions were taken into account. The national average price of an existing single-family home in November was $78,000, only about 4 percent higher than the year before, the realtors' association estimated.
But Carlson predicts that a growing shortage of housing is likely to cause prices to rise substantially in the next few years.
In the Washington area, Sumichrast said the situation is "only marginally better than the rest of the nation." He estimated that new home starts in 1982 would be about 15,000, down from an estimated 17,800 in 1981. That in turn compares with far higher levels historically--a high of 55,648 in 1965, for example, and a peak for the last decade of 44,218.
Housing Data Reports, local home marketing specialists, says that new-home sales appear to have bottomed out in November. The average price in the Washington area in November for new single-family and townhouse models at local subdivisions was $116,900, one percent less than six months earlier and only 3.5 percent higher than a year before, the group reported. In the District itself, prices actually declined in nominal terms from a year earlier by 0.4 percent, to $195,440.
Part of the reason for the leveling off of prices is the growing number of smaller homes appearing in the mid-price range, HDR said, adding that nine out of 10 subdivisions are offering financing discounts.
The stabilization of prices and moderating interest rates, as well as the possibility of a renewed surge in rates a year from now, are cited by real estate experts as evidence that the time to buy a home is in the next few months, while "bargain" rates--relatively--are available. In addition, they point to the numerous financing concessions being offered by sellers.
If potential buyers agree, a modest revival may be the mark of 1982.