When it comes to housing, many opt to play it safe

SMART MOVES

January 31, 1993|By ELLEN JAMES MARTIN

It was 1988 when the Columbia couple bought the 5-acre parcel in a distant corner of Carroll County. Their dream? To pack up the two kids and cocker spaniel and move to a realm so quiet they could hear the wind sway the giant evergreens at night.

But five years later, the couple's plans to build a new house in the country have been postponed for another 10 years, at least. Meanwhile, the design of the large white-pillared house has been scaled way back. Not only did they lop off a fourth bedroom and third bath, they also eliminated a living room -- figuring most of their time will be spent in the den, anyway.

"Our attitude now is to live under our means. We don't have much confidence in the future," confesses the 36-year-old woman, an accountant.

Like many Americans, the Columbia couple decided to postpone gratification when it comes to housing. Although they have a letdown feeling about their choice, they feel it's the safest decision -- given the unpredictable U.S. economy.

"We worry about real estate values, job stability, the cost of retirement and college costs," the accountant says.

"A lot of this post-inauguration euphoria is temporary. People are going to keep from incurring a lot of long-term debt until more jobs are created and until the U.S. can reposition a lot of its industries globally," contends William Fried, a Pikesville native and publisher of "Buying, Selling and Owning Your Home," a paperback by ECV Media.

Gene Gallagher, the broker-owner of an ERA Realty office in Bethesda, agrees.

"People still have that uneasy feeling in the pit of their stomach about what the future will hold. They're putting off until tomorrow what they could do today -- even if they have the wherewithal to do it now," Mr. Gallagher says.

*

If you're facing a difficult trade-off between financial safety and housing fulfillment, these recommendations from real estate specialists may be of value to you:

* Realize you have a lot of company in being financially conservative.

"People are making hard choices today," Mr. Fried says.

Many young professionals are deferring housing gratification in order to pay back substantial loans they amassed during their student years, he asserts. And older people are trying to build larger savings accounts in order to buy a "more consequential property" later, rather than a lesser house now, he says.

During the inflation years, buyers tried to grab property in advance of price increases. But the era of big appreciation gains is no longer in many neighborhoods. That means many buyers believe they can chase their dream as well later as now, Mr. Fried observes.

* Don't forget to factor property taxes into your housing plans.

Some experts believe that property taxes will increase dramatically in coming years -- eventually dwarfing the principal and interest payments that people pay on a home.

"All these government spending programs are ultimately going to have to be financed by higher taxes," says Steve H. Hanke, a professor of applied economics at Johns Hopkins University.

Mr. Hanke thinks that as property taxes push up, property values could fall because it will cost more for owners to keep properties. The expectation of rising property taxes may be something you want to factor into your future real estate decisions, he suggests.

* Balance your need to plan realistically for the future against your current hopes.

The good news for those who would like to build a new home or buy a resale property is that mortgage money is now relatively cheap, home prices are moderate and homebuilders are still anxious for your business. For a would-be buyer who is comfortably fixed and has a secure job, this could be the moment to actualize a housing fantasy.

"If your circumstances are correct, there's no better time than the present to make your move," says Mr. Gallagher, the ERA broker in Bethesda.

Through the years, he recalls a number of instances in which people came to regret the postponement of a housing dream. Two years ago, for instance, Mr. Gallagher remembers showing a couple of television reporters a small horse farm in Montgomery County. The couple loved the property, but given the recession, decided to defer purchase.

Now, unable to find anything comparable, they're sorry they postponed.

"I always feel saddened when people put off what they can legitimately do today," says Mr. Gallagher. "Too often they don't recapture that spark."

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