After nearly two years, the housing industry here has stopped banging its head against mortgage interest rates above 15 percent. And industry officials certainly are happy about it.
"I'm expecting a surprisingly strong year" in 1983, " said G. V. (Mike) Brenneman, outgoing president of the Washington Board of Realtors.
"I think everybody is optimistic," said John O'Keefe, head of the Montgomery County Board of Realtors.
The buoyant notes sounded by brokers and builders all around the Washington area are echos of the sales boom that has swept the country since interest rates began declining last August. Nationally, as 1982 ended, single-family homes were selling at an annual rate of more than 2 million--for the first time since August 1981--and housing starts were on the upswing. Industry leaders were beginning to talk of housing "leading the nation out of recession."
"We have seen an upturn in sales that started in August. While it's been stronger in the suburbs than downtown, it's starting to take hold downtown, too," said Brenneman. "That pent-up demand we've been hearing about is starting to express itself."
The resurgence is not limited to single-family homes, according to Brenneman. Condominium sales, too, are picking up, to a great extent because syndicates are buying them to put into the rental market, he said.
"I am predicting, rather forcefully, that within six to seven months you will see a shortage of condominiums, especially in the city," he said.
The only genuinely sour note being sounded in the local real estate community comes from the commercial side, where the area has become badly overbuilt and now is experiencing a sharp upswing in the office vacancy rate.
Builders, many of them from out of town, who jumped in during the late 1970s when the office market was very tight are now bringing on line large quantities of space at a time when growth among the area's traditional users, particularly law firms, has slowed or stopped.
Few in the industry foresee a disaster, but most agree that commercial construction is headed for a slowdown here.
In housing, by contrast, construction is picking up, and industry people here are hopeful of a steady rise through the year.
But behind the rosy immediate future lurk some serious long-term questions:
Will federal deficits and other economic forces conspire to drive interest rates back up?
If, instead, interest rates continue to fall, can builders meet a sharply increased demand without touching off a new round of housing inflation?
The favorable forecasts being churned out by the industry both here and on the national level tend to conclude with a phrase similar to this one used by Brenneman: "All this is predicated on continuation of present interest levels."
Brenneman is quick to add, "I don't think there's going to be big surge in interest rates."
But others are worried.
Few economists are forecasting more than a modest recovery this year. And those concerned with housing are fearful that demands for funds to finance construction, to fuel the recovery and to finance a federal deficit that may reach $200 billion will combine to drive interest rates back up.
"It looks like there's not much of a way out of higher interest rates caused by the deficit, so I think the housing market has a one-year breathing period between August of '82 and August of '83," said Dr. Mark J. Riedy of the Mortgage Bankers Association of America.
Riedy thinks autumn is likely to be the turning point because that is when "you hit the clash of the federal deficit, the private sector recovery and the housing market, and--depending on what they do to the deficit and how quickly the recovery comes--interest rates could go up dramatically."
"I don't buy that," said Brenneman. "There's far too much weakness in key industrial sectors . . . . I'm talking about steel, autos and so on--you've got at least a year before they start creating loan demand."
Alexandria real estate broker Leonard L. Manarin believes rates will stay at a lower level if, among other things, the general public accepts "some of these new methods of financing, these variable rates." If this happens, "I think the lenders will have a greater propensity to hold rates lower because they will not be locked in forever."
And where will the supply of new houses come from if interest rates stay down and money is available?
The depressed real estate market of the past two years has taken its toll of workers in the building trades, according to contractors, suppliers and union leaders. Building permits issued in the Washington metropolitan area indicate there were far fewer jobs available in 1982 for carpenters, plumbers and other craftsmen than in 1981. Permits issued in the first 11 months of 1982 dropped by nearly 5,000 from the same period in 1981, according to the Bureau of the Census.
All of the decrease came in new housing construction and renovation permits, while a modest increase of 190 permits was reported in nonresidential construction, for a total of 3,109 in 1982. The new construction last year added to the glut of office space in the metropolitan area, however, and will be a factor in the halting or slowdown of developers' plans for more commercial buildings this year.
"Carpenters are driving trucks" to make a living, noted Philip R. Miller of the District of Columbia Builders Association. If interest rates plummeted, he said, it would be some time before there could be much response from builders. Crews are dispersed and subcontractors out of business or reduced in size.
The experience of Plumbers' Local Union No. 5, which covers the metropolitan area, illustrates the effect of the sagging market on workers. About 20 percent of the union's 850 members were unemployed in 1982, according to Michael Collins, the local's business manager.