Real Estate Unhurt by Stock Dive
In this period of second-guessing and assessment of the Oct. 19 stock market plunge, the home building and real estate industries appear to be in a healthy state to cope with the current financial regrouping taking place within the economy.
There is no drastic halt in the sales of homes, new or resale, or in the larger investments in real property.
Recently, high mortgage interest rates, around the 12% mark, have already dropped to a national average of 11.40%, and in California, even lower, to 11.04%.
High rates had slowed the market, but the now-falling rates should pick up that slack as the fixed rates, by some predictions, head toward the single-digit range again.
Burned and scarred by the industry’s historic ups and downs, builders and developers in recent years have kept their inventories manageable, building new phases in units of 20 to 30, instead of the grandiose phases of previous cycles, which, today, would equal an entire subdivision of dwellings.
In the resale field, listings have become harder to come by, and if not creating a shortage, there certainly isn’t an over-supply.
Adding to the confusion and guesswork on the state of the economy is the intense bickering between White House and congressional conferees as they approach a Nov. 20 deadline to reduce the federal deficit by $23 billion--a 23 skiddoo situation if there ever was one.
A Los Angeles Times Poll published at midweek noted that consumers, reacting to a blitz of guesswork about the immediate future, planned to put off buying big-ticket items.
Eleven percent of 2,463 telephone survey respondents nationwide said they would postpone or curtail plans to buy a car; 10% said the same about a house or a vacation. Dining out and entertainment would be curtailed by 9%, Christmas gifts by 8% and major appliances by 5%.
Calming advice comes from the co-managing partner of Kenneth Leventhal & Co., specialists in realty and financial services. Stan Ross, addressing the recent convention here of the National Assn. of Office and Industrial Parks, said the gyrations in the stock market can be good news for real estate investors and home buyers.
Real estate offers a big “arena in which investors can duplicate the high returns that the stock market had been generating. Investment in real estate in virtually all forms is likely to enjoy a surge during coming months.
“And the institutional market, including pension funds--some of which took heavy losses--will find real estate investment an excellent alternative to maintain high-yield returns,” he said.
Federal Reserve action to allay the turmoil in the roller-coaster wake of the stock market drop means “the anticipated interest rate increase will not occur,” he added, and “not only will rates level off, they may possibly decline.
“For the home building industry, which had been braced for a decline in home sales as rates climbed, this is extremely good news,” he said.
“Institutions will be more willing to lend to home builders at the lower rates. And, more home buyers will be able to qualify for financing, potentially providing a boost for the industry that will carry it well into 1988.”
All things considered, consumers in the housing market can hope that despite the upheaval in the stock market, some of it will prove helpful to home buyers.
