Economic forecasters today broke through some of the gloom created here by a sharply declining rate of housing starts to assure home builders that the economy generally will be stronger this year than expected earlier.
They said housing prices will increase, but slightly below the general rate of inflation.
Panelists at a convention of organized home builders also agreed that homebuyers will have to accept high interest rates as the price for continued availability of funds for mortgage loans. Interest rates are high partly because thrift institutions are offering higher rates to long-term savers as a necessary incentive to halt the outflow of passbook deposits from savings and loan associations, which make many conventional mortgage loans.
Leonard Santow, representing a major Chicago bank, agreed with other panelists that housing starts will fall to 1.4 million this year compared to 1.7 million in 1979 and 2 million in 1978. He and Michael Sumichrast of the National Association of Home Builders said the housing market would be healthy in the South, Southwest and West, but would suffer in the Northeast.
Jay Janis, head of the Federal Home Loan Bank Board, held out hope for lower mortgages rates by the end of the year. Janis told a news conference that home mortgage loans in the 11 percent range might be available later this year, and that rates might even fall below 10 percent later in this decade.His comment was made in a session in which he defended the bank board's proposal to allow S & Ls to make what are called "rollover" mortgages -- lons on which interest rates are renegotiated every three to five years.
Saul Klaman, president of the National Association of Mutual Savings Banks, said he tended to be more pessimistic than some of his colleagues about the depressed housing market.
"In some areas, housing prices will decrease because too many potential buyers are unable to cope with both the high cost of living, record high housing prices and mortgage rates," he said.
Panelists said American homebuyers will have to accept smaller homes and pay a greater percentage of their income for them.
"Now it seems that each child has to have his own bedroom. I never had my own bedroom until I got married," said Klaman.