Interest rates are dropping while thousands of homes on the sagging housing market awaiting buyers during recent months still have "for sale" signs posted on the front lawn. So -- that spells the possibility of a resurgence in home sales during the coming summer months.
Unfortunately, perhaps wrong. According to national real estate and savings institution officials, that may not be the case at all, thanks to the twin combination of the current recession plus recent decisions by federal bank regulators involving savings certificates. In fact, some housing officials fret that ill-advised federal officials may be overlooking a real opportunity to quickly boost home sales.
Ironically, a number of factors are converging within housing-financial markets that should by themselves help to spark home sales:
* The drop in interest rates. The commitment rate on future mortgages -- the rate promised would-be buyers on home purchases to be consummated at a later time -- fell to 15.72 percent in May from 16.59 percent in April. But that represents the first drop since October 1977.
While the current mortgage rate is running between 13 and 14 percent in some areas of the US (the actual average was 13.98 percent in May, up from 13.46 percent in April), many mortgage specialists believe rates could drop into the 12 and 13 percent range in months ahead. In fact, a floor of 11 to 12 percent is not considered an impossibility by some financial experts.
* Summer months are traditionally home-buying months because of the end of the school year. Families are more mobile during this period than at any other time of the year. This year in particular summer months should be solid home sale months, thanks to the large backlog of families who have deferred home purchases during the past year because of rising interest rates.
Despite these "favorable factors," industry officials are plainly worried, and with sufficient reason, say analysts.
For one thing, the current economic slump -- which some economists believe could be the second worst since the depression of the 1930s, though not as severe as the 1973-75 tailspin -- is expected to cause many families to defer costly home purchases until they are certain their jobs are not endangered.
At the same time, federal banking regulators made several technical decisions in May that are seen by housing officials as working against the industry. Essentially, what the regulators did was to erase any differential in interest rates paid on six-month, and two-and one-year savings certificates offered by thrift institutions (savings and loan associations, and mutual savings banks) and those offered by commercial banks.
In the past thrift institutions have been able to pay slightly more on such certificates.
The rationale for the decision was to aid commercial and agricultural lending -- ussually the purview of banks. By contrast, thrift institutions provide most mortgage money.
But the long-run effect, grumble housing experts, is to make less money available for home mortgages.
So, what it all adds up to, according to housing industry officials, is the possibility of a continued slump in home sales, despite the fact that several economic factors are in place that should actually help lift the industry.
According to Dean Christ, an economist with the National Association of Home Builders, housing starts during 1980 will be around 1.058 million, down 40 percent from 1.744 million units during 1979. For 1981, the association is predicting starts of around 1.458 million.
Home sales of new single-family homes will be only around 509,000 in 1980, he reckons, down sharply from 709,000 units in 1979. In 1981, he says, sales will be around 515,000 units.
According to a new report released this week by the US League of Savings Associations, main trade group for the thrift industry, the number of first-time home buyers was sliced in half during the period from 1977 to 1979.
The reason? The price of homes, plus the monthly mortgage cost, rose by over one-third during that period.
According to the study, a two-family income is now almost a prerequisite for the first-time home-buying family.