Barring an outbreak of war in the Persian Gulf, the slumping U.S. economy will begin to recover next year, and a golden era for homeownership will be under way by the middle of the 1990s, according to a panel of market analysts.
A panel assembled recently in New Orleans for the annual convention of the National Association of Realtors expect ownership to be spurred by low inflation and low interest rates.
The outlook for renters is less bright. Rents will rise sharply, the analysts said, because of a dwindling supply of apartments, and the lack of incentives to build new ones.
Barbara Allen, a housing analyst for Kidder Peabody & Co., predicted that homeownership, which has fallen over the past two decades, will soar to a new high in the 1990s.
Baby boomers will become more productive as they move into their 40s and 50s, and they will increase their savings as they become empty-nesters, she said. Higher savings and productivity, she said, "will mean lower interest rates and lower inflation."
Ms. Allen thinks adjustable-rate mortgages could drop more than 1 percentage point, and fixed-rate loans almost 1 percentage point by next spring. "If we have a shooting war in the Middle East, all bets are off," she said.
Though the speakers in New Orleans generally were in agreement about the long-term direction of the economy, they were not in accord about its current condition.
Ms. Allen asserted that a recession has arrived, pointing to the downturn in construction activity throughout much of the nation.
The other panelists, Roger E. Brinner, chief economist for McGraw-Hill Financial Services Co., and John A. Tuccillo, chief economist for the Realtors association, think a recession is just ahead. They expect it to be "short and shallow," unless there is a gulf war.
Mr. Brinner expects housing to be"a growth industry" in the '90s. "Homes will increase in value with the inflation rate, and . . . continue to be an attractive investment," he said.
Sustaining a recovery, Mr. Tuccillo said, is dependent on a number of factors, such as signals of a solution to either the federal budget deficit or the Persian Gulf crisis, which would help restore consumer confidence. He also thinks that the large-scale disposal of properties acquired by the Resolution Trust Corp. from troubled savings and loans would help to strengthen the financial markets.
Mr. Tuccillo thinks that although "a dramatic decline" in interest rates over the next several years will generate a significant demand for home ownership, it may not do much to boost apartment production.
Multifamily-unit construction has fallen steadily since 1986, when the federal tax reform act wiped out most investment incentives. And that situation has been exacerbated, Mr. Tuccillo said, by tighter lending constraints.