Housing: Easier Credit

For the millions of Americans who dream of buying a house, and for the thousands of builders who yearn to sell to them, the deep two-year decline in the housing industry could be ending. Mortgage money is again amply available after being painfully short most of last year. Deposits in savings and loan associations exceeded withdrawals by $3.1 billion during January. The new surge of money into S and Ls reflects in part the drop in interest rates on short-term investments like federal notes, which were attracting cash out of thrift institutions.

In some cities, lenders are phoning real estate brokers with offers of credit. From New Jersey to California, the loosening of mortgage funds has also brought a return to down payments of 20%--a substantial drop from last year. That in turn has boosted sales of used homes.

But the easing of credit has in some ways made it tougher to buy. There has been a stiffening of sellers' once weakening resistance to cutting prices. Another impediment to sales: the cost of borrowing for mortgages has only been inching down from lofty levels of 10% or more. Mortgage rates for new homes still average about 9.4% nationally, including the extra points and service charges many lenders demand. Most experts expect home loan rates to dip to 8 1/2% later this year, though some S and L officials worry that mortgage costs could go up again this summer, when the Government begins to borrow heavily to finance the federal deficit.

Housing starts in January ran at an annual rate of 987,000 v. 2.5 million in January 1973. Yet some surveys indicate that a modest upturn is likely. The Manhattan consulting firm of Townsend-Greenspan forecasts that the pace of housing starts could hit 1.4 million by year's end. Many of these predictions assume that cuts in federal taxes and a decline in the rate of price increases will put consumers in a more confident home-buying mood. Whether those assumptions are correct could have critical significance. A resurgence in housing has been a leading force in lifting the economy out of every recession since World War II.

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