The U.S. real estate market is headed for another tumultuous year, burdened by an ongoing slump in market values and new construction, industry executives and economists said.
Indeed, on the eve of the National Association of Realtors annual convention here, attendees grappled with some sobering trends.Economists for NAR and other real-estate interests believe that both the residential and commercial markets will worsen before getting better, with the commercial arena bearing the brunt of the damage. Only the optimists called for a recovery to begin as soon as the third quarter of 1991.
Roger Brinner, executive research director for DRI/McGraw-Hill, said he is prepared to tell the conventiongoers in a panel discussion that "1991 will probably be as awful as they can imagine."
There are pockets of resilience in real-estate markets around the country. But in general, Brinner and others said 1991 will look much the same as this year, in which real estate took a beating by almost every measure available.
-Housing starts from August 1989 to August 1990 fell a hefty 14.9 percent, to 1.12 million units from 1.32 million, according to the Bureau of the Census.
-Seasonally adjusted sales of new units dropped 23.5 percent, to 550,000 from 719,000 during the same period, Census reported.
-While the cost to buy a home fell, mortgage rates rose, causing some consumers to postpone plans to buy a home. Median single-family home prices fell to $95,200 from $98,400 from July 1989 to July 1990, according to NAR. Rates on fixed-rate mortgages in October stood at 10.17 percent, according to the Federal Home Loan Mortgage Corp., up from 9.9 percent in January. Rates peaked at 10.48 percent in May.
-While new mortgages for commercial real estate rose 29 percent, to $15.2 billion from $11.79 billion from August 1989 to August 1990, commercial construction loans slumped, according to the Department of Housing and Urban Development. The latter, which load the market at the front end, dropped a steep 19 percent, to $7.71 billion from $9.57 billion during the same period, HUD said.
-Downtown office vacancies stood at an all-time high of 17 percent in September, up from 16.7 percent a year ago, while industrial vacancies rose to 6.9 percent from 6.3.