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Evolution or Revolution?

THE recent bobbing and weaving of the I economy proves that while history tends to repeat itself, it never does so exactlyl there are always new elements, altered circumstances or different stresses.

How true this is of the present condition of the housing market. Long expected to lead the withered U.S. economy back to its more usual state of snap and vitality, the housing industry has shown only a few flickering signals that it intends to do as expected. Its performance so far has been more of a stumble than a confident stride.

There are many reasons for this and they include the facts that the savings and loan associations, while taking in deposits at record rates, have not returned to the frantic activity in mortgages that marked them in the boom days of the early 1970s. While the deposit in-flow is high, many s&ls fear it is so-called "hot money" that will flow right back out again as soon as a better return can be found for the money. The s&ls have a heavy debt load from recent years when their assets were severely depleted by withdrawals. Importantly, the public still shys away from the major commit- ment of buying a new homel fear of continued recession still haunts millions of people.

An equal factor is the sheer high cost of houses. A Library of Congress survey showed 23% more income was required in 1974 to buy a new home than in 1973.Incredibly, last year, only 15%of thefamilieshad the $23,330 annual income required to buy the median-priced new home, which now costs $41 ,300. Turn it around: 85% of the families of America are priced out of the median-priced new home market.

If these conditions remain, and there is no reason to look for a quick reversal of this situation, is it any wonder that housing starts are not soaring now that the s&ls have money? The traditional conditions for a housing boom, demand and money, are here, but the situation is just not the same as in the previous years.

One can't help but wonder if the single family home market isn't in for a revolution when it is priced beyond the reach of 85% of the families. Many of the old rules will no longer apply. The reason is simple: it's a different ballgame.