No housing downturn is in sight in the Washington area this season as mortgage money remains plentiful and home sales have begun their annual warm-weather acceleration.
Although home building starts have dropped nationally, and price levels have softened in speculative areas of Southern California and Chicago, this year's Washington's market appears to be on a course similar to 1978's. Arctic weather kept buyers out of the new-home subdivisions in January and February, but March traffic has been up, and major realty firms report strong resales activity. The northern Virginia Board of Realtors' monthy data showed a one percent increase in sales during the first two month of 1979 compared with the same period the year before.
Washington area mortgage money also is more plentiful than pessimistic national econmic forecasters predicated last year. Local S&Ls are experiencing small net savings inflows, and a few are gearing up to handle large dollar volumes at rates below or near national average levels.
Community Federal S&L for example, is offering loans up to $100,000 on D.C. and Northern Virginia owner-occupied properties at 10 1/4 percent plus on discount point to the seller where the down payment is 25 percent or more. Loans with as low as 5 percent down payments go for 10 3/4 percent plus one point. (A point is equal to one percent of the mortgage principal, and is assessed by the lender to incease the effective yield on the loan.)
Orlando Darden, president of Community Federal, says he has secured a major investor who is able to pump 10 1/4 percent mortgage money into the Washington area at up to $1 million a month. This is one-quarter to one-half percentage point under the rate prevailing in most active metropolitan housing markets outside New England. Darden declined to indentify the institutional lender, but added that the loans must be secured by "cream puff" properties to get through the commitment process.
"That means they've got to be priced realistically, well located and in excellent physical condition or they can't qualify," he said.
House in Maryland won't be financed with the special funds because the state's usury law prohibits charging point s on home loans, and Community Federal insists on tacking a one-point service fee on every loan. However, properties "throughout D.C. and Northern Virginia can easily pass out tests," according to Darden. Loans can be closed in less than one month from the date of initial commitment.
Other area lenders report adequate supplies of funds - via the secondary mortgage market or from savings deposits - and foresee a brisk spring. James Russell Shadid, assistant vice president of Equitable S&L of Wheaton, says the lifting of Maryland's former 10 percent usury ceiling has helped, "although I think some buyers and sellers out there are still a little wary" of today's 10 3/4 and 11 percent prevailing rates."
The only significant cloud on the mortgage market horizon is the uncertain impact of the revision of the rules governing interest payments on six-month, $10,000-minimum certificates of deposti. The new rules prohibit compounding of interest, eliminate the rate differential between @s&ls and commercial banks when 180-day Treasury bill rates exceed 9 percent, and take away the one-quater-percentage-point premium that S&Ls could add the Treasury bill rate to attract deposits.
If heavy federal borrowing in the months ahead pushes Treasury bill rates well above 9 percent, large-scale withdrawals of funds from S&Ls could occur.