Housing Will Help Spark Recovery, Industry Says : Real estate: The key is affordable interest rates, trade groups say.

WASHINGTON —  The nation’s major real estate trade groups say the housing industry will continue to lead the economy out of recession this year despite the failure of the government to provide any new stimulus.

“We believe that as long as interest rates remain affordable, we’ll see housing do its part” in advancing the economic rebound, Dorcas T. Helfant, president of the National Assn. of Realtors, said on the eve of the group’s midyear meeting this week.

The housing industry has led the economy out of most recessions since World War II.

Although home building represents less than 5% of the nation’s economic activity, it spills over into other industries.

For instance, materials companies provide the lumber and bricks needed to build homes. Transportation firms haul the nails and concrete. Newspapers sell ads. And builders and buyers outfit their homes with products such as appliances and carpets and furniture.

In the final quarter of 1991, while the overall economy advanced at an anemic annual rate of just 0.4%, residential construction posted a 12.3% gain.

Housing starts and new- and existing-home sales have both increased this year, but both the Realtors and Home Builders project that the industry recovery will be well below the rebounds following previous recessions.

David F. Seiders, chief economist for the National Assn. of Home Builders, told an NAHB forecast conference here last week that housing will continue to improve but “not at . . . the levels of activity of the mid-1980s.”

The Home Builders are forecasting a 26% increase in housing starts this year, to 1.28 million, while the Realtors project new-home construction to advance 24%.

Both forecasts are considerably below the 60% jump in housing starts during 1983, the year after the last recession.

Recognizing the importance of the housing industry, President Bush proposed in his State of Union address a $5,000 tax credit for most first-time home buyers to help stimulate the recovery.

Helfant said the Realtors believed that the credit would have generated sales of 300,000 to 500,000 more new and existing homes.

But Congress rejected the proposal, and Helfant said prospects of enactment later this year are dwindling as the economy improves.

Even without the tax credit, the Home Builders are projecting new-home sales to rise 27%, to 644,000, while the Realtors are forecasting a 26% increase.

According to the Home Builders, existing-home sales will advance 10% this year, to 3.54 million. The Realtors estimate that resales will be up 7%.

Seiders also said he assumed that there will be no new fiscal stimulus for either the economy in general or housing in particular this year. But he added that “the Fed’s hearts and minds still are in the right place.” That could mean even lower interest rates if they are needed to keep the recovery alive.