The U.S. housing market is looking a little healthier these days, but it probably will not serve as a vigorous force for economic recovery, as it has in the past.

The housing recovery has been under way since the industry hit its low point in January, when the national psyche was traumatized by the Persian Gulf war. But both housing the economy still look relatively weak, and while they are expected to show a little muscle in the year ahead as the nation continues to climb out of recession, not many heads will be turned in admiration.

"I don't think anyone believes this housing recovery will be anywhere near as strong as we saw in the last recovery in 1982," said Mark Obrinksy, senior economist for the Federal National Mortgage Association. "That kind of rebound is just not in the cards.

"Housing is a piece of the overall recovery, but it certainly doesn't have the oomph it had in the past. It's not contributing as greatly as it has typically in the postwar era," he added.

On the political front, state and local housing agencies again face the prospect that Congress will not extend the tax-exempt status of mortgage revenue bonds and low-income tax credits, which are due to expire Dec. 31. The tax credits are a "critical ingredient" for financing multifamily housing, said Michael Carliner, an economist for the National Association of Home Builders.

The latest indications from Capitol Hill are that Congress may delay acting on the revenue bonds and tax credits until sometime next year and then approve them retroactively as part of a new budget or tax package. Any delay would bring either type of financing to a halt, said Robert Sheehan, consulting economist for the National Apartment Association.

"So what if they are made retroactive," he said. "You'll never get bond counsel to approve anything based on betting on Congress."

But economic, not political, problems pose the biggest set of obstacles to housing industry revival.

In the 1970s and 1980s, housing was a kind of magic talisman for getting the economy moving again. As interest rates fell, home buyers were lured back into the market, and builders -- with the help of ample credit from banks and thrifts -- readily accommodated the demand by putting up houses.

The construction of new homes brought jobs to the industry and stirred industrial production by boosting plant orders for new carpeting, appliances, and other household goods. With factories producing more goods, jobs and income got a boost, helping to restore public confidence and consumer spending. As demand for goods and service increased, businesses stepped up investment.

Lower Interest Rates Only Plus

This time around, interest rates are down, with the help of the Federal Reserve under Chairman Alan Greenspan. Lenders in many parts of the United States are offering fixed-rate mortgages below 9% -- rates not seen since 1977 -- and rates on one-year adjustable mortgages have fallen below 6.75%.

"You've got one plus right now, and that is that interest rates have come down a lot," said Richard Peach, deputy chief economist for the Mortgage Bankers Association.

But home values have stagnated or fallen in some areas of the United States, especially in parts of California and along the East Coast. Moreover, in recent years, even though the economy was healthy, home prices rose less rapidly than in the past. As a result, many potential home buyers are less enthusiastic, believing what they buy will not appreciate and compensate them for their financing costs, Mr. Peach said.

According to Rosanne Cahn, an economic researcher for First Boston Corp., U.S. home prices adjusted for inflation are still not as high as when they peaked in 1979. Prices in the East have taken the biggest beating, but other regions also have experienced decline, she said.

Housing analysts point out that household formation, or the rate at which people establish households, also has slowed considerably in recent years -- a function of demographic and social changes. With an aging population, more people already have settled in their homes and are raising families.

In addition, the recession has forced many young adults to move back in with their parents, while others have become more reluctant to strike out on their own.

In the boom years from 1983 to 1989, household formations averaged 1.5 million per year, said Mr. Peach, but that figure has fallen below 1 million in the past two years.

Meanwhile, the savings and loan industry, a traditional source of credit for builders, is foundering in a politically unpopular bailout that has cost taxpayers some $165 billion. Surveys conducted by the Fed of senior loan officers at commercial banks show that those banks, hurt by mounting real estate losses, also have tightened credit.

"Builders all around the country are arguing that it's harder to get a loan," said Robert Van Order, chief economist for the Federal Home Loan Mortgage Corp. Moreover, Mr. Van Order said, banks are under pressure to build up their capital -- money they must set aside for losses. Banks have refrained from lending and have been buying Treasury securities to build up their balance sheets.

The ongoing credit crunch led President Bush earlier this month to unveil a new set of initiatives designed to spur bank lending. Included in the measures will be new guidelines -- due out Oct. 31 -- for federal bank examiners to use in evaluating real estate loans in troubled markets.

Some analysts, however, say the problem is not a lack of credit or the cost of credit but falling demand caused by a weak economy. According to the Federal Reserve, total consumer credit has eroded steadily throughout most of this year. Outstanding credit fell for the fourth month in a row in August, the most recent month for which data are available, while auto credit fell for its eighth month in a row.

Consumers Remain Wary

Despite all the talk of recovery, economists say consumers -- whose spending accounts for two-thirds of total U.S. output -- are still holding back because they are worried about their jobs and the debt they are carrying. Since summer, retail sales generally have been flat.

Consumer confidence, which rebounded following the war with Iraq, has retreated. According to the Conference Board survey, it slipped in September for the third month in a row.

Considering everything, it is shaping up to be a "wimp of a recovery," said Robert Genetski & Associates Inc., a Chicago forecasting firm, in a market letter. The National Association of Business Economists, in an annual forecast released last month, calls for real gross national product to rise only 2.5% to 3% over the next year -- roughly half the rate of past post-war recoveries, when growth averaged from 4% to 5%.

Evidence of the housing industry's recovery has been accumulating since the spring. Construction starts have climbed back to a seasonally adjusted annual rate in excess of 1 million units after hitting a low of 847,000 in January. Sales of new, single-family homes are back to 540,000 a year -- the level that prevailed in July 1990, when the recession began.

Sales of existing homes -- which account for three-quarters of all sales, have rebounded to an annual rate of 3.25 million units from a low of 2.9 million in January. Median sales prices of existing homes got above $100,000 in April and held throughout the summer, up from $98,000 a year earlier.

Housing industry experts say they expect to see modest gains throughout next year. That includes the depressed multifamily sector, which has shriveled in the last few years from the lingering effects of tax reform, overbuilding, and high vacancy rates.

Mr. Carliner of the home builders' association estimates housing starts will total just over 1 million units for the year, the lowest since 1945. For 1992, his forecast calls for starts of 1.25 million units.

Fannie Mae's forecast is less optimistic, calling for what Mr. Obrinsky characterized as a "mild pickup," to 1.17 million units next year. Sales of existing homes are expected to rise to 3.6 million, up from an estimated 3.375 million this year.

As inflation stops cooling and the economy gains a little steam, interest rates should rise slightly but will not be a problem, Fannie Mae economists project. They estimaate mortgage rates will rise about half a percentage point from current levels, which would keep fixed-rate mortgages under 9.5%.

For the multifamily sector of the housing market, analysts say the outlook remains generally dreary. Mr. Sheehan of the National Apartment Association estimates starts of apartments and other multifamily units will be around 180,000 this year, the lowest since 1955. That would be down from 298,000 in 1990 and 669,000 in its peak year of 1985.

"The market's just dead," said Mr. Sheehan. He forecasts multi-family starts will rise in 1992 about 15%, to 207,000, but that would still be the second lowest total since 1956. And, he added, his forecast probably has more of a down-side risk than an upside one. "People are sort of hearing in the media that there's a recovery, but they don't feel it."

In particular, Mr. Sheehan said he suspects the apartment market may not come back much because many young renters seek to share available town houses and single-family houses, rather than live alone.

Still, he said, the slumping multi-family market represents an opportunity for state housing agencies if they can use their leverage with banks to help small builders get construction financing. "That's going to get more houses for low- and moderate-income households."

For the housing industry in general, analysts say, supply conditions over all are helping to set the stage for a rebound. The supply of new homes on the market is tighter, which suggests builders will have to step up construction to meet demand in the future. Meanwhile, there is evidence that a tighter supply of housing could bring a firming in prices.

Reports from the Commerce Department say the supply of new single-family homes has fallen steadily this year. At the current sales rate, there are about 6.6 months' worth of new homes on the market. That is down from January's 9.3 months of supply and is the lowest level since November 1989.

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