Prospects Looking Brighter For Home Financing

September 30, 1990|By James M. Woodard | James M. Woodard,Copley News Service

Prospects are looking brighter for families who need to finance the purchase of a home -- or refinance their present residence. But overall, current factors affecting real estate add up to a mixed bag of good and bad news.

Many experts now predict home mortgage interest rates will decrease during the second half of 1990, in the wake of an inevitable mild economic recession. This was clearly delineated in a special report from the National Association of Realtors:

"Sinking consumer confidence in the U.S. economy and a fall-off in consumer spending are leading to a recession, which has now becomeinevitable because of the crisis in the Middle East," the NAR report said.

"The stage is set" for the end of eight years of economic expansion in the United States, the report said. Very slow gains in the growth rate of the gross national product (the value of the nation's goods and services), coupled with low household savings and low income growth indicated the recession was imminent even before the Iraqi invasion crisis occurred in the Persian Gulf.

A brief, mild recession is predicted, beginning in the final quarter of 1990 and ending in the first quarter of 1991, stated NAR.

Other positive and negative factors in the real estate market, primarily tied to the Middle East crisis, were pointed out in the NAR report.

Sharply higher oil prices will have negative effects for housing, notes NAR chief economist John A. Tuccillo.

He said the housing industry will be hurt from both the supply and demand sides. Since housing uses oil-related products, construction costs will rise, curbing supply; and, since consumers will be more reluctant to take on debt for big expenditures, such as homes, demand will be hampered.

However, the economy of the oil-dependent areas will be boosted from the oil-price increase, helping to sustain a revival that has already begun in several Southwest markets, Mr. Tuccillo notes. The positive impact of higher oil prices in the "Oil Patch," and the resulting higher real estate values there, will benefit the federal government's disposition of the large volume of properties it has acquired from failed thrifts, he said.

At the same time, special "incentive" mortgage loan programs are helping many families find affordable financing for a home purchase.

For example, buyers can qualify for a larger loan (higher debt-to-income ratio) when buying an energy-efficient home. Ask your lender about these little-known energy-efficient mortgages (EEMs).

Also, special buy-down mortgage loans are becoming more common in many regions. In recent years, this was a technique primarily used by new home builders and developers to entice prospects and help buyers qualify for a loan.

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