Better to Buy Now Than Wait Till Later

Like most people, Manhattan attorney Michael Carter looked long and hard before buying a home. Last month his winter-long search finally paid off and Carter signed for a new five-bedroom contemporary house in fashionable Fairfield County, Conn. He was not alone. With personal income rising, and lenders flush with mortgage money, Americans all across the country are streaming back into the housing market, accelerating a two-year recovery that now shows signs of ripening into an authentic boom.

Figures released last week by the Commerce Department show the magnitude of the trend. New housing starts in March jumped 49% over the 1976 pace to an annual rate of 2.1 million. That was the highest since May 1973, and more than twice the eleven-year recession low of 923,000 touched in February 1975. Single-family dwellings accounted for most of the surge. The March annual rate of 1.5 million was the highest for any single month since the Government began keeping records in 1959; experts believe it was bettered only a couple of times in the 1950s.

Builders agree that the March performance was no fluke. With the exception of January, when one of the worst U.S. winters in a century stopped building in many parts of the nation, the market from Brentwood, Calif., to Boston has been rising for months. Builders, mortgage lenders and real estate agents are scrambling to keep up with demand. Says Jerald Ruben, president of General Realty Corp., one of the largest new-home real estate agencies in the Detroit area: "It's the most fantastic thing I've seen in 25 years." Reports Connecticut Realtor Phyllis McGovern: "The momentum has been building for over a year, but I've never seen anything like the last three months."

One reason for the market buoyancy is the increase in the number of young people—born in the postwar baby boom —who, seeking more space for their own young children, are now entering the market as first-time house buyers. But an equally important reason for the home-buying surge is a highly paradoxical one: rocketing housing inflation that threatens to turn the old joke "If you had to buy today the house you're living in, you couldn't afford it" into grim reality. Since 1970, according to a recent joint study by Harvard University and M.I.T., the price of new houses has climbed twice as fast as family incomes. The cost of maintaining a home (insurance, heating, property taxes) has risen still more. If present trends continue, the average new home, which now sells for $53,100, will go for $78,000 by 1981.

Now or Never. In 1974 and 1975, inflation frightened many would-be buyers out of the housing market. Now it is having the reverse effect: rationally or not, people who have any thought of buying a house figure they had better move immediately before the price of single-family homes climbs beyond the reach of all but the wealthiest. Says Atlanta Businessman Rod Kinder, 51, who paid $89,500 for a New England type house in the Atlanta suburb of Dunwoody last month: "We decided to buy now before it got out of the realm of reality altogether. It was now or never."