The expected 1992 rebound in home sales will not be the usual locomotive of economic recovery. Economists say to expect only a slow-wheeling bicycle and predict that housing demand from the so-called "baby bust generation" will be weak in the 1990s.
"Housing probably will be a leading sector in the recovery, but it won't be nearly as strong as it has been in the past. Instead of being an engine of growth, it will probably be a bicycle," foresees Mark Obrinksy, senior economist with the Federal National Mortgage Association.
"We simply have fewer people out there forming new households and looking for housing space," agreed Lyle Gramley, chief economist for the Mortgage Bankers Association.
The number of Americans in the prime home-buying age group, 25 to 34, peaked at 44 million in 1989, says Richard Hokenson, a demographic economist at Donaldson, Lufkin and Jenrette, the New York investment firm. By 1995, there will be fewer than 41 million in that category, he says.
The so-called "birth dearth" generation will be bad news not only for the housing industry but for other sellers of big-ticket items, such as car dealers and appliance manufacturers, says Jeffrey Kosnett, senior associate editor for Kiplinger's Personal Finance Magazine.
Mortgage rates are at their lowest level in more than 14 years, Mr. Kosnett notes. "But most people taking advantage of the low rates will be refinancing their mortgages or buying houses that are already standing.
"That won't do much for construction workers or the people who sell accoutrements for housing -- like Sears and Hechingers."
To be sure, not every housing specialist buys into the notion that housing demand will be weak as the economy moves into the predicted economic recovery in 1992.
"I think it's a silly argument," says Lynn Michaelis, chief economist for Weyerhaeuser Corp., a forest products and homebuilding company.
He contends there is still a large amount of unsatisfied housing demand among the "baby boom" generation, especially among those age 35 to 44.
High housing costs kept many of the baby boomers from buying the houses they wanted during the 1980s, according to Mr. Michaelis.
In 1980, 74 percent of those in the age group 35 to 44 owned their own homes, but by 1990 the figure had fallen to 67 percent, he points out.
Also disdainful of what he calls "the missing baby-boomer theory" is Peter G. Miller, author of several books on residential real estate.
"We have tremendous pent-up demand for housing in this country and households forming at a faster rate than we've built homes," Mr. Miller insists.
Mortgages are now available at 8 percent and housing prices have settled, if not dropped, in many U.S. communities in recent years.
Once the job prospects of Americans solidify, strong demand for housing should be unleashed throughout the United States, Mr. Miller predicts.
In recessions dating back to 1970, housing has been a leading sector of the economy, meaning that it recovered earlier than most of the economy and helped lead the nation out of recession.
Usually, mortgage interest rates fall during a recession, sparking home purchases, increasing employment for construction workers and promoting the sale of products related to housing, Fannie Mae's Mr. Obrinsky notes.
"There's usually a multiplier effect that increases jobs and increases expenditures in the economy. It's a self-reinforcing process," he says.
But Mr. Obrinsky and others who agree with his economic thesis contend that, despite low mortgage rates, this year's housing recovery will be relatively restrained.
He predicts new-home sales in the United States of 575,000 this year, a 15 percent increase over 1991.
The number of existing homes sold should rise just 5 percent, to 3.43 million, he believes.
"That's what I'd call a modest, not a strong, improvement in housing," Mr. Obrinsky says.
High levels of consumer debt will restrain a housing rebound this year, in Mr. Obrinsky's opinion. "Consumers remain heavily indebted and therefore seem reluctant to take on large amounts of new debt -- which in virtually all cases buying a new home means," he says.
Borrowing to the hilt may have been chic during much of the 1980s, when home prices were headed skyward and most buyers could count on building equity in their homes quickly. But the era of housing inflation is over, at least for the time being, and consumers have lost a rationale for borrowing as heavily as they can.
Compounding the weakness in housing is the fact that many baby-boom era Americans who might normally be in a position to trade-up to a fancier and more spacious home are now more focused on saving for retirement and their children's college educations, Mr. Kosnett says.
He says, "People are feeling that it's more important to put cash away rather than to buy another house."