Realtors Celebrate Record 1986 Amid Concern for Next Year

SAN DIEGO —  As realtors gather here this week to celebrate the best California housing market in six years, they also are thinking about potential problems that could put a damper on sales in 1987.

Their concerns certainly aren’t great enough to throw a wet towel on the near-carnival-like atmosphere surrounding the California Assn. of Realtors’ 82nd annual convention at the Town & Country Hotel.

Along with the training sessions and exhibits, there also will be the usual collection of parties, dinner outings and shows. As one local realtor puts it, the annual gathering “is the one chance a year we have to celebrate, kick back and have a good time--and maybe learn something while we’re at it.”

Indeed, realtors have good reason to celebrate. Sales of existing single-family homes in California are running far beyond last year’s pace. The 428,000 homes CAR expects will be sold by the end of this year would be 5% above last year’s level, making 1986 the best year for home resales since 1980.

Joel Singer, the trade group’s chief economist, predicts 1987 will be nearly as good: He thinks sales will ease only about 5% from this year’s torrid pace. The modest decline is expected because some pent-up demand has been satisfied by the prolonged drop in interest rates.

“We’ll see a very good market next year,” Singer says. “It won’t be quite as good as this year, but it’ll still be quite good.”

But 1987 will have its share of problems as well. CAR and its 105,000 members across the state are girding for another battle over what the trade group’s president, Venice realtor Richard J. Rosenthal, has called the Reagan Administration’s “assault on the American dream of homeownership.”

In particular, the realtors are irked that the problems that plagued the Federal Housing Administration this year will likely hobble it again in 1987. That would mean the agency would once again operate until it reaches its credit limit, and then be forced to close its doors until Congress and the president agree to put it back in action.

The FHA had to shut down several times earlier this year, and sometimes had to wait weeks before it could resume operations. At the height of this year’s sales activity, Rosenthal said, the closures meant that “9,000 California households every day had to search for other forms of financing, delay, or forget their home-buying plans.”

FHA guidelines prevent the agency from insuring mortgages that exceed $90,000. As a result, the program is particularly popular in Central California, the Inland Empire and other areas where home prices are well below statewide averages.

The fact that FHA could be in for another on-again, off-again year “concerns” Judy Thompson, president of the Sacramento Board of Realtors and a broker in Citrus Heights.

“If we have another year of temporary shutdowns, I think some people might get a little gun-shy of being involved with FHA,” says Johnson, whose area is one of the biggest users of the program in California. “Sellers might not want to sell to FHA buyers because they’ll be afraid their deal will hit snags.”

Another potential statewide problem is the rising cost of private mortgage insurance. Many lenders, as well as “secondary market” agencies such as the Federal National Mortgage Assn., require borrowers who make small down-payments to buy policies that guarantee repayment from private insurers in order to get the loan.

“Loans where you put down 5% are virtually unavailable because insurers’ guidelines are overly restrictive,” says Connie Stoddard, a Contra Costa realtor and chairwoman of CAR’s real-estate finance committee. “We hope to get (insurers) to loosen up a little.”

But while potential FHA and mortgage-insurance problems would affect most of the state, realtors in almost every region of California are preparing to tackle their area’s own set of unique problems.

In the Bakersfield area, for example, the housing market has been hurt because the oil industry--one of the region’s biggest employers--is still reeling from slumping prices and sluggish demand. Thousands of residents have lost their jobs. Bakersfield’s sales rate and home-price appreciation will likely continue to underperform statewide averages next year unless the oil industry rebounds, some brokers concede.

“We’ve got our share of problems, but we’re still upbeat about the rest of this year and 1987,” says Ken Swanson, president of the Bakersfield Board of Realtors. He says local salespeople are taking part in the city’s efforts to lure new business into the area, and that the region is becoming home for thousands of people who can’t afford--or don’t want--to buy a home in Los Angeles or surrounding areas.

Realtors in the mountain resort of Big Bear hope that the tax-reform jitters that hurt their market in 1985 and earlier this year will be a thing of the past by the time next year begins. Sales in the area dried up when Congress and the president pondered reducing or eliminating write-offs for second or vacation homes.

Delayed Sales

“I had 10 clients personally write to me and say they were putting off their plans to buy up here because they were worried about the tax bill,” says Janet Stevens, president of the Real Estate Board of Big Bear. But as the tax bill became clearer and it appeared second-home owners would retain their write-offs, she added, “sales really picked up, and got even stronger over the summer.

“We don’t have people standing in line to make offers, but we have good, steady activity--and that’s what puts the bread on our tables,” says Stevens.

Orange County’s resale rate is expected to remain strong next year, while builders of new homes in the area’s master-planned communities, such as Rancho Santa Margarita, are confident that buyers will continue lining up in front of their tracts with the hope of snaring a house.

Sales should also remain brisk in the Inland Empire. In fact, all the building and sales activity in parts of Riverside and San Bernardino counties is boosting sales in surrounding areas.

“A lot of those people who are building houses in Fontana, Rialto and San Bernardino are living up here and driving down the hill each day,” says Barry Binks, a broker in the mountain hamlet of Crestline. “We even have people driving into Orange County, Los Angeles and Long Beach. We’ve been transformed from a resort community to a bedroom community.”

In San Francisco, some realtors are worried about a city ballot initiative next month that would put even stricter curbs on the city’s growth. Although the measure is ostensibly aimed at curbing the development of more office space, some local brokers say it could also hinder the creation of more housing units in a city already suffering from short housing supply and the highest home prices in the nation.

“One of the goals of the initiative is ‘to preserve the character of the neighborhood,’ ” says Bill Jansen, president of the San Francisco Board of Realtors. “If a (housing) project changes traffic patterns, someone could go to court (if the measure passes) and say it’s changing the character of the neighborhood, and they might be able to stop it.” That could translate into fewer new housing units and hinder “lower classes’ upward mobility,” Jansen adds.

San Francisco isn’t the only area where realtors are trying to fight back limits on growth or defeat other types of land-use measures. Plans that would put curbs on new home construction have popped up in several areas, including Simi Valley, Carlsbad and Walnut Creek. More of those movements are expected to crop up next year.

In perhaps the most interesting land-use case, realtors in San Luis Obispo County are opposing a proposed ordinance which would require voters to approve the installation of any onshore support facility for oil platforms. Although some salespeople favor the measure because it could preserve the scenic beauty of the coastline, others are opposed to it because it might put overly restrictive limitations on what an owner could do with his land.

“These kinds of ordinances get carried to extremes,” complains Tim Banducci, an Arroyo Grande realtor who’s fighting the initiative. “In this case, if you own a McDonald’s in San Luis Obispo and you’ve contracted to serve food on a rig, you’d have to go to the voters if you want to expand your restaurant.”

Still, realtors up and down the state say they’re confident next year’s problems can be resolved, and that 1987 will turn out to be another good year for housing.

“We can overcome any obstacle,” says Big Bear broker Stevens. “But it sure gets tiring, jumping over all the hurdles.”