After three years of poor to mediocre business, the Seattle mortgage market is starting to make a comeback.

"As far as the mortgage business goes, the housing market here was quite a bit better in the first quarter of 1996 than it was a year ago," said Richard Bennion, executive vice president for Continental Savings Bank. Originations at Continental were up 20% in the first quarter of this year from the same period a year earlier.

"Of course, the first quarter of 1995 was pretty crummy," he added.

The underlying problem: three years of corporate downsizing by Seattle- based Boeing Co. The aeronautics company let go almost a third of its employees, often plying them with early retirement packages, which stagnated the mortgage market, Mr. Bennion said.

People stayed in the homes they owned rather than moving up, he explained.

But the area's other corporate giant, Microsoft Corp., has come "pretty close" to picking up the slack left by Boeing, said Haywood Watson, specialist for the Fannie Mae Foundation's "Showing America a New Way Home" initiative.

Microsoft's presence in nearby Redmond has drawn affiliated businesses in droves, to the point where Seattle's economy no longer lives and dies by Boeing.

But it's still an uphill battle to increase home sales in the city. Home prices have increased steadily since the 1970s, while incomes remained fairly stagnant, said Mr. Watson.

Seattle home prices average $247,000, according to a recent Coldwell Banker survey.

This has kept potential homeowners out of the market, Mr. Watson said.

In fact, Seattle's homeownership rate is significantly lower than the national average, the U.S. Census Bureau reports. Only 48.9% of the city's residents own their own homes, compared with 64.2% nationwide.

Next week the Fannie Mae Foundation will hold a housing fair in Seattle, designed to promote homeownership. More than 5,000 people are expected to attend, the agency said. The fair will be cosponsored by the local National Basketball Association team, the SuperSonics.

Despite the Foundation's efforts, home sales are not expected to increase substantially following the fair.

Real estate prices are not expected to fall any time in the near future, Continental Savings' Mr. Bennion said. Land available for new development near the city is scarce, he said, limiting the available home inventory. "We're surrounded here by mountains, streams, lakes, and cliffs," he said. "Most of what's flat has already been built on."

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