Real estate industry expects growth

January 24, 1993|By James M. Woodard | James M. Woodard,Copley News Service

A slow but steady improvement in the real estate market this year is expected by most industry professionals.

The reasons for their optimism could translate into good news for home buyers and sellers -- reasons like lower home prices, continued low mortgage interest rates, renewed consumer confidence and a new crop of mortgage loan plans that make home financing more achievable.

Similar projections are expressed in the annual National Real Estate Review, a report on market conditions prepared by the National Association of Realtors.

"One key to economic growth in 1993 is lower interest rates," the report stated. "The Federal Reserve Board vigorously pushed down short-term rates [last year] and by mid-1992 the discount rate stood at its lowest level since the early 1960s. The Fed, however, is not able to pull a similar lever for long-term rates, which are more crucial to home purchases.

"One critical influence on long-term interest rates in 1993 will be the direction of the federal budget deficit. If Washington passes legislation designed to promote economic recovery that also yields a significantly higher budget deficit, then long-term rates may well rise, putting housing markets and the recovery itself at risk."

The overriding factor to long-term interest rates in 1993 lies with the behavior of inflation, the NAR report emphasized. "Rates will continue their descent as businesses and households realize that inflation in the U.S. remains in line," it said.

Brokers in most regions of the country are experiencing a sharp increase in the number of first-time home buyers who are now taking action to achieve their dream of homeownership. An increasing number of these prospective buyers view the current market as a "window of opportunity" -- a time when home prices are as low as they will be for some time and when mortgage interest rates are still at a 20-year low.

Real estate investors and developers are also bullish on the future market. Developers can expect new pools of capital and targeted development opportunities during the next four years, it was predicted by Stan Ross of Kenneth Leventhal & Co., a research and accounting firm.

President Clinton "has made it clear he wants to spur the economy with tax credits and infrastructure spending," Mr. Ross said. "Developers should be keeping close watch on Washington so they are poised to take advantage of any Clinton moves that could alter tax strategies, impact property values and spark building."

Mr. Ross advised real estate leaders to keep tabs on the key congressional committees that influence lending and spending parameters.

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