The home resale market is beginning to recover from its summertime blahs, but new construction of homes and apartments remains stymied by a serious shortage of bank financing, real estate executives said last week at the Greater Baltimore Board of Realtors' annual convention.
"The positive side is that interest rates are as low as they've been in 14 years. But the jobs area is a problem. We're getting an average of 2,000 layoffs in the U.S. each day," said John Tuccillo, chief economist for the National Association of Realtors.
Mr. Tuccillo predicted that the number of homes changing hands on the resale market will rise from an estimated 3.3 million units this year to 3.5 million in 1992. But he doubts that, during the 1990s, the resale market will rebound to the 3.7 million-unit peak of 1987.
"As a whole, the '90s will be a decade of growth and a decade of low interest rates. But I think it's also going to be a period in which the challenges to the real estate industry are going to be enormous," Mr. Tuccillo told the convention.
Mr. Tuccillo is convinced mortgage rates will continue to fall slightly, from their current level of about 9 percent to as low as 8 percent within a couple of years. Even so, he thinks layoffs, demographic trends and the lack of consumer confidence will inhibit an increase in real estate sales.
"This is a recovery that's seeming not to happen. The economists are optimistic but the people are not," Mr. Tuccillo said.
Low interest rates are bringing into the housing market many first-time buyers, who have no property to sell. But those who have a choice between staying in their present homes or trading up to a better property are generally staying put -- given their concerns about the economy, he said.
"The market is vibrant at the lower end but stagnant in the trade-up segment," he said.
In the future, the trade-up segment of home sales also will be hurt by the aging of the baby boom generation, which is reaching its 40s, Mr. Tuccillo argued. That's because older homeowners tend to prefer smaller, less-demanding properties.
"With the aging of the postwar generation, you're going to see less demand for four-bedroom colonial homes in the suburbs with the big center hall and more demand for two-bedroom condos near the Inner Harbor where maintenance is low and you don't have to rake any leaves," he said.
"Our reason for pessimism is that interest rates on mortgages are tremendous but our building industry is unable to access capital," said Robert Kleinpaste, president of the Legg Mason Realty Group, which tracks Maryland real estate markets.
Still, mortgage money is becoming more readily available to consumers, as more commercial banks begin to emphasize residential lending, Mr. Kleinpaste said. Banks are coming to see home mortgages as relatively safe and profitable compared to loans made for investment property, he said.