OFFERING early glimpses of their prescriptions for economic growth, top White House economic advisers say that revitalizing the sagging real estate sector is a top priority. A capital-gains tax cut is at the core of growth measures President Bush will unveil in his State of the Union address in January. Michael Boskin, chairman of the president's Council of Economic Advisers told the House Ways and Means Committee last week: "The most important benefit would be to stimulate values in the real estate industry. Nothing could be more important for the economy." Mr. Boskin, joined by Treasury Secretary Nicholas Brady and Budget Director Richard Darman, underscored the immediate economic impact of bolstering the real estate sector, "since the largest asset for the majority of American families is directly in their homes." A stronger market would, he said, "do a lot to restore consumer confidence and increase their wealth." But private economists aren't convinced. The commercial and residential markets are virtually saturated for the next five to 10 years, they say, and increased activity would push prices, not production, up. The re-introduction of real estate tax loopholes - plugged with the 1986 tax reform - would create the same environment that brought speculators, and a construction glut, to the market. "Vacancy rates would be even higher and values even more depressed on the commercial side, and there's just not much of a need for more single or multi-family dwellings," says Patric Hendershott, a housing expert and Ohio State University professor of finance and public policy. Mr. Bush and his economic team must have listened attentively during their Dec. 2 meeting with 12 presidents of national real estate trade associations, ranging from the Mortgage Bankers Association of America to the National Multi Housing Council. The real estate representatives delivered a message on behalf of their industry, which they say accounts for 20 percent of the gross national product and some 9 million jobs: A depressed real estate market means a depressed economy. Workers in the loosely defined real estate sector accounted for 40 percent of United States job losses during the past year. "Every sales dollar spent on real estate ripples through the economy five to seven times," says Stephen Driesler, senior vice president of the National Association of Realtors. Two of the inhibiting factors, says Mr. Driesler, are the lack of available credit, because banks aren't lending, and "a tax system that is so punitive, people are locked into their holdings - they won't sell." A reduction in the capital-gains tax, coupled with the partial restoration of a "passive loss" tax break for real estate investors [which would allow those losing money on one real estate investment to deduct the loss against properties that are not losing money] have both Republican and Democratic supporters. "Restoring the passive loss provision and reducing the capital-gains tax would restore conditions that brought about the whole real estate collapse," cautions Robert Shapiro, chief economist of the Progressive Policy Institute, the think tank of the Democratic Leadership Council, chaired by Democratic presidential candidate and Arkansas Gov. Bill Clinton. "Investors made speculative real estate investments," says Mr. Shapiro, "because of incentives and shelters [written into law in 1978 and 1981] - all o f which meant short-term tax sense to them but no real estate market sense." Industry economists say that jump-starting the market during this recession won't provide a powerful vehicle for growth. Looking to real estate investors to reinvest their capital gains from one transaction into another is a dead end, says Anthony Downs, a senior fellow at the Brookings Institution. "There is no developer's equity left." Banks and insurance companies are holding the equity largely because highly speculative investments turned most deals sour, and developers failed to repay debts, turning the bank loans into bank equity. With the market glut, commercial property has lost up to 35 percent in value this year. Even if there were equity left to reinvest, says Mr. Downs, "Commercial real estate is tremendously overbuilt." Nothing will stimulate it," he says. The US government is saddled with billions of dollars in devalued properties it seized from S&Ls that failed due to bad real estate loans. Growth prospects in the residential sector are dim. "Consumer fears mean an inventory of unsold new houses throughout the country," says Downs. Even without the inventory, there is another obstacle. Tight credit - which is broadly attributed to regulators who were reeling from the S&L crisis and placed high capital requirements on banks - has left residential property developers with little financing to buy land and build, says Downs. "Bankers can't tell between a good loan and bad loan so they stopped making all loans," he says. After the 1982 recession, the US economy grew during at 6 percent annually during 1983 and 1984. It was generated by housing starts, purchases of durable goods, and business investment. This time around, "the US isn't going to have two years of back-to-back, 6 percent growth," says Mr. Hendershott. "We're going to have a slow economy - from 1 to 2 percent growth - for a couple of years."