The economy is just going through a temporary adjustment, but housing prices could soar in the 1990s, predicted Mark Tipton, incoming president of the National Association of Home Builders, a Washington-based trade organization.
"Anyone who thinks the Northeast is down the tubes forever is very naive, because the Northeast has a tremendous amount to offer. It has job diversification, a good employment base. Its got all the ingredients that makes up a good economic climate," said Mr. Tipton, who was in Baltimore last week to attend a regional homebuilders conference.
Nationally, Mr. Tipton predicts that the economy will begin to recover during the first or second quarter of next year and says that in parts of the country the recovery has already begun. The housing market in the Southwest, North Central and Northwestern states is starting improve, and once consumer confidence is regained in the Northeast, it, too, will improve, Mr. Tipton said.
"The building community is very cognizant of oversupply and overstocking, so they are going to be very cautious about start-up units. . . . It is the financial system that has cut off the production side of housing," Mr. Tipton said.
Loans to acquire land for development are becoming increasingly more difficult to get, he said. "The banks and financial community are creating a vacuum for new starts. When the effect of that vacuum takes place, we will have soaring prices and it will put everything over the brink," he said.
It was generally assumed, Mr. Tipton said, that when the savings and loans gave up writing housing loans, the banks would pick up a larger portion of the business.
The problem surfaced in February when Robert L. Clarke, the comptroller of the currency, sent out a notice to bank officers giving the impression that all real estate loans were suspect.
"That's unfair, because all real estate loans are not suspect, but the banks have to deal with the regulators," Mr. Tipton said.
In a speech to the homebuilders association in May, Mr. Clarke said the comptroller's office did not tell bankers not to make loans, but rather "to take care in making loans."
Mr. Clarke also wrote in his office's advisory to bankers in February: "Nothing in this advisory or in OCC examination policy is intended to discourage sound real estate [project and development] lending.
"I'm not suggesting to anybody that we need to open up the floodgates and let all the money run freely. I don't agree with that at all. I am suggesting that any bank or lending institution that uses good and prudent lending practices with good underwriting criteria should continue to make real estate loans."
The homebuilders association estimates that there will be 12 million new households in the United States over the next decade, which would result in a need for about 1.2 million new housing units. "That 1.2 million housing units has got to be built," Mr. Tipton said.
"I think consumers have a great opportunity right now to buy a home," he said. "It couldn't get any better from the consumer side of it. Interest rates are relatively low, supply is available, and people are ready to give good deals."
Mr. Tipton heads Whistler Corp., a Raleigh, N.C.-based development and building company, while attending meetings around the country for the National Association of Home Builders.