FOR IMMEDIATE RELEASE
Contact: Donya Fahmy
PMI Mortgage Insurance Co. National Housing Conference Roundtable Releases Findings on Future of Home Ownership
Problems of Housing Market Run Deep, Outlook for 1993 is Gloomy
San Francisco, CA. October 27, 1992 . . . The PMI Mortgage Insurance Co. National Housing Conference Roundtable today released the findings of its 1992 National Housing Conference in a white paper. The paper, entitled "The Economic Threat to American Home Ownership," predicts a continued slump in the U.S. residential housing market, barring significant action by the federal government to reduce the deficit and turn consumer confidence around.
The paper notes that the market for residential housing in the United States is experiencing its most serious decline since the Great Depression. With the exception of refinances, mortgage originations for new homes are stagnant, in spite of historically low short-term interest rates --the lowest in 20 years. Housing starts for 1992 are expected to increase only slightly from 1991, the worst year for starts since 1945.
"Although the housing industry has led the nation out of recession for the last eight economic cycles, there is real concern that this sector of the economy, which contributes one-fifth of the nation's total Gross Domestic Product and employs an estimated 4.4 million people, will not be strong enough to do so this time around," said Al McNichol, Chairman and Chief Executive Officer of PMI Mortgage Insurance Co., sponsor of the 1992 National Housing Conference.
McNichol noted that the findings reaffirm the strength and soundness of this country's housing finance system, pointing to the success of the secondary mortgage market in assuring a constant flow of funds to the primary market and making mortgages available to a wide variety of home buyers in spite of tight credit conditions elsewhere.
However, stagnant or declining property values and shrinking consumer confidence combined with the increasing problems of an overleveraged economy are keeping buyers out of the market. These conditions have proven to be too formidable even for a robust mortgage delivery system.
In fact, the paper cites the federal deficit as the single greatest economic factor impacting the long-term health and viability of U.S. housing and residential real estate markets. The debt build-up, both public and private, which fueled economic expansion in the 1980s is now a limiting factor on economic growth, and a chief cause of the severity of the current recession.
"The latest figures indicate the federal deficit will exceed $300 billion this year, with total annual U.S. debt of close to $4 trillion," said Lawrence Chimerine, a senior economic counselor for DRI/McGraw Hill and a fellow at the Economic Strategy Institute in Washington, D.C. "Interest on the federal debt now accounts for 14% of government spending, compared to 9% in 1980 and 6% in 1959, and consumes approximately 42% of individual income tax revenues."
The PMI Roundtable participants, who presented these findings at a press conference today, welcomed short-term initiatives such as tax incentives for first-time home buyers but called for more leadership and commitment to a national housing plan or policy in keeping with the Housing Goals Act of 1949. They urged the next president to take immediate action to ensure the future health and viability of the housing market and continue to further the nation's housing goals.
The PMI Mortgage Insurance Co. 1992 National Housing Conference was held earlier this year to provide a forum for some of the nation's leading housing and real estate experts to debate critical issues confronting the industry today and create an ongoing dialogue about the future of American housing policy. Participants included representatives from a wide range of industries including mortgage banking, government agencies, home builders, savings and lending institutions, realtors, private mortgage insurance, and housing advocacy groups.
PMI Mortgage Insurance Co. is a San Francisco-based private insurer of residential mortgages. Established in 1972, PMI is a subsidiary of Allstate Insurance Company, licensed to do business in all 50 states and the District of Columbia. It is the third largest private mortgage insurer in the United States with 38.5 billion dollars of mortgage insurance in-force as of year-end 1991.
Copyright 1992 PMI Mortgage Insurance Co.