Creative Home Financing

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Home Ownership: A Fading Dream
Creative Financing Techniques
Predictions for Housing Market
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Home Ownership: A Fading Dream

Home Buyers Hurt by High Interest Rates

The dream of owning a home is fading fast for the millions of Americans who will try to buy their first home sometime during the 1980s. High interest rates, rapidly rising home prices and scarce mortgage money have ended the era of relatively easy home buying that swelled the ranks of homeowners from 44 percent of the population in 1940 to 66 percent in 1980. The housing industry and the financial institutions that support it are suffering along with potential buyers. At current interest rates — between 17 and 19 percent — there are few home mortgage borrowers, few home sales and few construction starts. According to a study by the National Association of Home Builders (NAHB), “the current housing recession is the longest running and most devastating … the industry has suffered since World War II.”

Housing starts in September fell 1.7 percent to a seasonally adjusted annual rate of 918,000 units, the U.S. Commerce Department reported Oct. 19. The September figure was 38 percent below the year-earlier annual rate of 1.482 million units. The National Association of Home Builders estimates that only about a million new housing units will be built in 1981. That would be the lowest level since 1946 and one that falls far short of the 2 million new housing units a year the association estimates will be in demand in the 1980s. Sales of existing single-family homes were down 8.4 percent in September to 2.07 million units. That figure was 36 percent below last September's sales, according to the National Association of Realtors. New mortgage loans last year were down 30 percent from 1979; for the first half of 1981 the volume was down another 11 percent. A recent nationwide survey of 400 savings and loan associations found that 31 percent of the S&Ls were not making mortgage loans at all.

The nation's home builders are going broke at an unprecedented rate. According to the NAHB, bankruptcies among builders are up 40 percent this year over last, and roughly half of its membership — which represents about a third of all builders in the country — have stopped building. “It's a disaster and it isn't over,” said the association's chief economist, Michael Sumichrast.