On April 22, 1889, some 50,000 "boomers" lined up at the dusty Oklahoma Territory border. Horses and wagons pushed against one another, fighting, for positions closer to the starting line. AT high noon, a bugle sounded and the greatest one-day race for land in US history began.
As the "Eighty-Niners" thundered across the prairie, men jumped from their horses and stuck crude signs into the ground, claiming land for themselves and their futures. By evening, a once-lonely spot of brushland was the tent city of Guthrie, with 10,000 inhabitants.
Something like that Oklahoma Land Rush is poised to begin in the US housing market. While real estate dealers wait for customers, a burgeoning backlog of potential home buyers is waiting for a bugle-like drop in interest rates that will signal the return of affordable mortgage payments and a revival of the stagnant housing market.
When the rates have dropped substantially, real estate experts believe, home prices will once again rise sharply, though a high-speed escalation will probably not last long. Housing prices may end up higher, but monthly mortgage payments could still be more affordable.
Meanwhile, for the first time in decades, housing prices in many parts of the country are not keeping up with inflation. People are finding out that what was once a "sure" investment, promising high returns, may be a bit more risky, especially if they need the profits from the old house to buy a new one.
"We don't have the steamy real estate market we had in the 1970s anymore," said James Christian, chief economist with the US League of Savings Associations. "Instead of more than keeping up with inflation, real estate has ceased to do that."
In the last year, the average price of existing houses increased just 5.3 percent, well below the rate of inflation, says John Carlson, chief economist with the National Association of Realtors. In July alone, the median rice of an existing home fell $200, to $67,500. The US Commerce Department, however, said that for a new single-family house, the natioal median price rose slightly in July -- up $100 to $69,800.
the main culprit, economists and real estate people say, is mortgage interest rates. At over 17 percent in many places, these rates have cut the number of prospective home buyers almost in half.
At any particular time, there are just under 5 million Americans who want to buy houses, Mr. Carlson says. Normally, the housing market can fill most of this "underlying demand." But in the last year, he notes, only about 2.5 million people have been able to buy the home of their dreams -- or even less than their dreams.
The rest have become part of a growing backlog of people who walk into banks or real estate offices, look at the numbers -- particularly the huge monthly payments created by high interest rates -- and decide to come back another day.
This situation, notes Thomas Hughes, executive vice-president of the Chicago Real Estate Board, is particularly true in North Central cities like Detroit and Pittsburgh and in parts of the Chicago area. It has also been noted by real estate observers in the Washington, Los Angeles, and Boston areas.
In Washington, where the high turnover of government and military workers has traditionally made that real estate market one of the most lively in the country , house prices in the first six months barely kept pace with inflation, going up a little over 11 percent, says Daniel Richard, director of marketing at Long & Foster Realtors, one of the larger real estate firms in the area.
This year's change in administrations did little to improve things, he adds. "We had expected a tremendous influx of new buyers from the people coming in with Reagan," he said. "That boom never materialized. Some people rented or downgraded their buying decisions, buying smaller houses than they had planned on."
"There is a tremendous pent-up demand just waiting for a drop in interest rates," said Lyn Medoff, owner of a Boston-area real estate agency and chairman of the Greater Boston Real Estate Board's education committee. "Many sellers have dropped prices or are helping with financing, which lowers what they earn from their houses." A drop of just two percentage points in mortgage rates, she says, would be enough to release some of this demand.
That drop may come, carlson says, as banks and savings institutions gather in deposits for the recently approved All-Savers Certificates, which will begin offering 70 percent tax-free interest beginning Oct. 1.
Carlson says a drop of two points off mortgage rates would quickly add half a million buyers to the housing market.
However, Dr. Karl Pearson, a professor emeritus of business administration at the University of Michigan, who continues to write and lecture on real estate, believes a more broad-based drop in interest rates is needed. The cretificates "could help some, but they won't be the whole answer," he said. "A lowering of interest rates in general would really help."
Industry officials agree that whatever it takes to push mortgage rates down, a sudden release of pent-up demand could once again send house prices escalating very quickly.
"A sudden, uncontrolled jump in demand would be just as bad for the industry as the current situation," the US League's Mr. Christian said.
In the meantime, the dark days for the real estate industry are continuing. With 33 straight months of declining home sales, says Realtor's spokesman William Ellingsworth, the ranks of association members has shrunk from 760,000 to under 700,000 in the past year. Almost all of the losses have been in small, one-to five-member agencies, he said.
While people wait for mortgage rates to come down, prospective home buyers are either having to decide whether to put off the purchase or seek out one of the many "creative financing" arrangements, where the seller pays for part of the financing or the buyer looks for some sort of adjustable mortgage, or both.