Bells Are Ringing In More Real Estate OfficesDavid Greising
Markets have their own special language. For house hunters Bob Leaper and Carolyn Judge, the real estate market in Cambridge, Mass., was screaming: "Buy!" Open houses suddenly were packed, with places fetching bids their first day on view--in a market that had seemed comatose until late last fall. "Onehouse we saw had five bids on it right away, and it ended up going for more than the asking price," says Leaper. In late January, the couple jumped, making an offer of nearly $300,000 for a five-bedroom home. Within days they expect to lock in a 7.875% fixed-rate mortgage. "With interest rates the way they are, I didn't want to wait another day," Leaper says.
Across the country, baby boomers and others are slowly bringing real estate back to life. True, the market's lower reaches have been strong for more than a year. But now, with 30-year fixed-rate mortgages at 7.90%, nearing a 20-year low, and with a brightening economic picture, the market for move-up houses and high-end properties is starting to move, too. "In the first quarter, there's going to be a real jump for property prices," says Daryl Jesperson, senior vice-president of Re/Max International Inc., one of the nation's biggest brokers. "It's not that property will appreciate that fast, it's that the type of houses being sold is changing."
That's welcome relief in a market that saw only shallow, if steady, recovery during most of last year. Sales of existing homes jumped 9% in 1992, to nearly 3.5 million units, and housing starts shot up 18%, to 1.4 million units. But most of the action featured houses priced at $122,400 or less. And for the first time in 15 years, half of all the buyers were first-timers.
At last, better-heeled buyers are testing the waters. Many are still wary, especially since the recovery seems fragile. Unlike the recessions of the early 1980s, largely blue-collar affairs, the recent downturn ravaged white-collar ranks. Just as that group was revving up for a housing comeback, once-bedrock companies such as Sears Roebuck, IBM, and Boeing reignited the caution light with large-scale layoffs. "A lot of white-collar workers have been fired, and those that haven't been fired still think they might be," says John Pfister, vice-president for marketing and research at Chicago Title & Trust Co.
Indeed, some high-price markets are far from recovery. Take New York and Los Angeles (map). Prices there are still dropping--despite comebacks in the Big Apple's financial-services industry, and even though California's most dramatic defense cutbacks are probably over. In January, real estate agent Peter Whyte finally landed a buyer for a Beverly Hills house that listed in 1990 for $3.2 million. Sale price: $1.675 million. "We never in our wildest dreams thought it would go below $2 million," Whyte says.
CUPBOARD IS BARE. In most places, though, builders are scrambling to meet a new wave of high-end customers. "We're starting to gear ourselves up to the move-up buyers again," says Michael Ryan, president of Town & Country Homes, whose sales topped the Chicago market last year--only because it focused on building starter homes. "The baby boomers are starting to look for luxury homes." Even amid big corporate cuts, optimism can trickle through. The week Sears announced it was axing 50,000 jobs, Kimball Hill Inc. sold three homes at a development just a mile from Sears' Merchandise Group headquarters.
Smaller cities--from Atlanta to Denver to Spokane, Wash.--many of which missed out on the 1980s price boom, are leading the recovery this time. Denver's economic comeback and the building of its new airport helped push home-construction permits up 58% last year. They should climb a further 25% in 1993. "There's just no housing inventory," explains Tucker Hart Adams, chief economist at Central Banks of Colorado, a large housing lender. Adams counted just 9,682 houses on the market at yearend, down by 8% from 1991, in an area of 2 million people.
Even in the nation's hardest-hit markets, anxiety is starting to ebb. In Boston, emboldened sellers are now refusing to accept contingencies on sales contracts, and buyers are taking out bridge loans in order to make cash offers on houses. "It's busier than it has been since the good ol' 1980s," says Jean LeVaux, owner of Prudential LeVaux Properties of Cambridge. Connecticut's resurgent housing market, meanwhile, is swimming successfully against a tide of bad news. Bic and Kollmorgen are moving operations out of state, and United Technologies plans to cut 5,700 jobs from its Pratt & Whitney aircraft-engine unit. Yet low asking prices and bargain interest rates are holding sway. Barry P. Rosa, vice-president for mortgage real estate at People's Bank in Bridgeport, says demand for construction loans is at a three-year high. And mortgage closings this year, mostly refinancing deals, should well surpass last year's total of $785 million.
Folks such as Mehdi Mostaghimi and Du Cheng are riding to the rescue. For four years, the couple lived in a two-bedroom condominium in Cheshire, Conn., waiting for a chance to buy a house where they could start a family. Now, they've bought a 1.7-acre lot in Madison, Conn., and signed up a builder for a $365,000 home. "There is no reason to wait," says Mostaghimi. "We are at the bottom on price." And that condo's feeling mighty cramped.
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