For the third straight year, Peter Fugiel, author of Nuveen's influential Housing Finance Journal, takes home the All-American first team honors in the housing field. Mr. Fugiel and his quarterly report have the ear of most big institutional investors in housing bonds.

Second team winners are Susan Dushock of Lehman Brothers and Kurt Van Kuller of Merrill Lynch & Co.

"1992 has been an erratic year for housing bonds in the tax-exempt market," Mr. Fugiel said. The year has certainly seen its ups and downs, as issuers once again were forced to race to market to avoid the annual sunset of mortgage revenue bond legislation. The annual battle to renew this legislation has most issuers expressing disgust with Washington and hoping that a permanent extension will come through this year.

"While the sunset is expected to be surmounted by a generally favorable Congress, it is anyone's guess whether the political climate for the remainder of 1992 will permit," Mr. Fugiel said. Municipal revenue bonds are usually a big favorite with congressional members eager to prove they are bringing benefits home to their voters. But ongoing budget woes have cast some doubt over the program's chances.

Big Drop in Home Ownership

In other news, Mr. Fugiel said that the 1990 Census shows a big drop in the number of American families that have access to the home ownership market. Even though home mortgage interest rates are near post-war lows, the number of people who can buy a home appears to be stagnant.

"With housing prices far above what they were in the late 1970s, many starter households still cannot swing the down payment or meet the monthly principal and interest," Mr. Fugiel noted. That situation is worst on both coasts, where real estate prices continue to remain high.

Strong Demand Continuing

And while rental vacancies are at 7.1% nationwide, Mr. Fugiel said the strong demand for affordable rental housing continues in most areas.

Nuveen's outlook on housing bonds is nonetheless high, as the credits continue to gain positive attention from the credit-rating agencies. Mr. Fugiel cited various well-known, well-managed state housing agency credits.

"The political diversity and financial strength of the state housing agencies continue to be the Cinderella story of the revenue bond market," Mr. Fugiel said. He pointed to the fact that at least 10 state housing agencies have combined equity positions in excess of $100 million, as evidence of this fact.

Warnings on Credit Weakness

Despite that glowing report, Mr. Fugiel does have a couple of warnings for investors. First he noted that credit weaknesses persist among certain local single-family deals that don't produce annual audits. Last year, Mr. Fugiel pointed to disclosure as one of the key aspects of the housing market. Two housing agency trade groups last year called for better disclosure by issuers.

In addition, Mr. Fugiel pointed to the recent surge in refundings as a possible source of problems. "Enough single-loan, multifamily market-rate deals continue to be refunded to give any institutional investor pause to think what their funding bonds have to offer in terms of yield to get anyone's attention," he said.

Mr. Fugiel warned that some of those deals might not "work" from a real estate point of view.

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