Even the silver lining is dulled for home buyers
Home ownership is a top-priority goal for most American families, yet it's becoming less attainable every day. Nationally, the median price of today's new homes is about $67,000. Mortgage-interest rates on prime residential properties are hovering arond 17 percent. At that rate, fewer than 5 percent of all US households can qualify for a median-priced home.Skip to next paragraph
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At least that's the situation when home buyers must obtain a new conventional mortgage loan to finance the purchase. fortunately, there are other workable ways to buy a house. Also, there are signs on the horizon of an improving market for buyers and sellers alike.
At this time, however, the picture is very dismal.
"The housing industry may be slipping into its deepest recession in modern times," accoridng to Merrill Butler, president of the National Association of Home Builders (NAHB).
"The housing slump now being forecast would precipitate a much deeper national recession than previously anticipated and, in the long run, generate more inflation," he adds.
NAHB recently lowered its forecast of new housing starts this year to 1.1 million, down 50 percent from the more than 2 million units built annually in 1977 and 1978.
Dr. Jack Carlson, executive vice-president of the National Association of Realtors (NAR), is equally pessimistic about prospects in the resale housing market.
"Preliminary figures indicate that housing markets across the nation are in the midst of a steep decline, with sales dropping between 10 and 70 percent," he reports.
"On the basis of our survey, we estimate that resale activity in March was at a seasonally adjusted annual rate of 2.6 to 2.7 million units. All of the ares reporting sales are off, with the average decline in the 25 to 30 percent range.
"The housing industry is bearing a disproportionate share of the burden from the government's futile and anemic efforts to fight inflation. The burden on housing is greater than at any time in the last 30 years."
Both association leaders express concern about the thousands of additional families who have been forced out of the home-buying market because of record-high interest rates and stiffer qualification requirements.
Mr. Butler also points out how the impact of the current crunch ripples far beyond home sellers and buyers.
"It will result in the loss of 1.4 million jobs, almost $25 billion wages, and more than $6.7 billion in government tax revenues," he asserts.
Meanwhile, home prices dropped slightly in March, according to the Federal Home Loan Bank Board (FHLBB). The average selling price for a new home, reports the FHLBB, was $76,100, down from $79,800 a month earlier. the average price of an existing home fell to $68,200 from $69,300 in early February.
A year ago the average price of a new home was $68,100. For an existing home it was $62,200.
Despite the decline, the average price of both a new and resale house is still substantially higher than a year ago.