Economists are upbeat about housing rebound

January 27, 1991|By Jim Johnson | Jim Johnson,McClatchy News Service

ATLANTA -- The sudden turnabout in oil prices following the outbreak of war in the Persian Gulf left some economists at the annual National Association of Home Builders convention upbeat about the recovery of the housing industry this year.

Oil prices skyrocketed, then fell, leading economist Laurence Meyer of St. Louis to comment: "What we thought would take four to six weeks took only three to four hours."

Mr. Meyer said he expects oil prices to fall some more. That scenario, combined with higher government spending because of the war, will result in a stronger-than-anticipated economic recovery, he predicted.

David F. Seiders, the association's chief economist, conceded that his forecast has been clouded by the war. He said he expects interest rates to fall and "the resurgence of consumer demand to lead an upturn in the housing market in the second quarter of next year."

Martin Perlman, the group's outgoing president, believes that housing demand will rebound quickly if the war ends soon. "If the war drags on, then housing could be damaged more than we anticipated," he said.

Mr. Perlman, a Houston builder, added that the recovery would be even stronger if not for the credit crunch.

Last year, housing starts nationally totaled 1.2 million, the lowest number since 1982. Because economic recovery isn't expected to start until the second half of this year, the association forecasts only 1.05 million starts in 1991. That figure will grow to 1.25 million in 1992 and to 1.4 million in 1993, predicted Seiders.

David Stockman, former director of the U.S. Office of Management and Budget, is less optimistic. Mr. Stockman thinks the recession will be prolonged, even if the war isn't.

"I don't think we'll snap back when the war ends. This is . . . due to excessive debt," he said.

Mr. Stockman, a financial analyst with the Blackstone Group, expects the recession to remain shallow and to continue "in fits and starts" for two to three years. The housing sector, he said, "will be severely impacted," and starts will average about 1 million annually.

John A. Tuccillo, chief economist for the National Association of Realtors, thought oil prices would soar with the start of the war, and that interest rates would follow. Now, he said, "we believe that interest rates will go even lower."

Mr. Tuccillo predicted that prices on resale homes nationally will dTC rise an average of 6.4 percent this year, while new-home prices will increase 7.6 percent.

Attendance at this year's convention was estimated at 55,000, down about 5 percent from last year.

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