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OWNING A HOME IS 32% CHEAPER TODAY THAN 15 YEARS AGO

Pardon my twist on a Mark Twainism, but reports of the Baby Boom generation's demise as home-buyers have been greatly exaggerated. So says the newest annual report on the state of the nation's housing, published by the Joint Center for Housing Studies at Harvard University.

"The State of the Nation's Housing: 1997" shows that the nation's housing industry is in the middle of a boom that dates back as far as the current economic expansion, to the early part of this decade. That boom, unfortunately, has yet to be heard across much of Upstate New York.

"Housing is one of the sustaining forces in this long economic expansion," the study states. Last year, the number of existing-home sales climbed to 4.09 million from 3.8 million -- an all-time high -- while the number of new homes sold jumped 13.5 percent or 90,000 units to 757,000. Between 1993 and 1996, the number of homeowners increased 3.4 million or 5.5 percent. As a result, the national home ownership rate at the end of 1996 stood at 65.4 percent, just a half percentage point below the all-time high reached in 1980.

"Much of this growth reflects the aging of the Baby Boomers into the peak home-owning years of 45 to 54," the Joint Center study said. Indeed, in the past three years, the number of Boomers between 45 and 54 who experienced the joys of owning a home jumped by 1.3 million or 10.3 percent, with that group's home ownership rate rising to 75.5 percent in 1996 from 75.1 percent in 1993.

Why are Boomers busy buying? It's affordability, stupid.

Owning a home today is more affordable than during much of the 1980s and the early 1990s, the Joint Center study reported. Consumer confidence is high, reflecting what's called solid income and employment growth, which in turn have combined with some of the lowest mortgage rates in a decade to make buying a home fun -- at least until you're forced to do the paperwork.

A perfect example of how far housing affordability has come (or not come) can be seen by looking at after-tax mortgage costs. The after-tax cost equals the mortgage payment minus tax savings from owning a home, over and above the standard tax deduction.

Go back to 1982: Ron was in the White House, Mario was in the Albany mansion and interest rates were hovering on average at 14.73 percent. Think about that -- rates nearing 15 percent. A median-priced home cost $82,984, making your monthly mortgage payment a very healthy $928. Even the after-tax payment was $768.

Now compare those sobering numbers to 1996 figures: a mortgage rate of only 7.58 percent, with a median-priced home costing $90,376. Your mortgage payment (with 10 percent down) was $573 -- down $355 or 38.2 percent. The after-tax payment totaled only $523, down $245 or 31.9 percent from 1982.

Look at the news another way: In 1982, you, Mr. and Ms. Homeowner, were putting aside 41.2 percent of your monthly income to pay for the before-tax payment on that Cape Cod in Tonawanda. In 1996, that percentage had fallen to 24.1 percent, meaning you had the difference to spend on other things.

"The after-tax cost today of owning a home is many cases less than it costs to rent," said David Barrett, tax partner with the Buffalo accounting firm Freed Maxick Sachs & Murphy. "If you rent, at the end of 20 years, you have a box of rent receipts. But if you own, you're building equity which, while it may not be totally liquid, is increasing."

All of the good news nationally has to be looked at with a somewhat jaundiced eye by local real estate professionals. You might call this market more bust than robust -- while 1996 sales of single-family homes were down just 0.1 percent from 1995, real estate types will tell you that 1995 was not the deal-signing year you tell the grandkids about. More than 7,500 existing single-family homes sold in 1996, with the median price in the $83,000 range, where it has hovered for most of the past two-plus years.

Baby Boomers are buying homes locally but, unfortunately, not at the pace experienced nationwide. Sluggish local job growth -- specifically in the upper management ranks -- has left this market at the mercy of the first-time buyer. Luckily, low mortgage rates and the availability of homes priced under $90,000 have allowed first-timers to carry the housing ball.

"Comparatively speaking, Buffalo, the entire upstate market, has lagged the country in terms of economic strength," said Daniel Symoniak, executive vice president of the Greater Buffalo Association of Realtors. "This has been a first-time buyer's market."

Merle Whitehead, a partner in Stovroff & Potter Real Estate Inc., said, "The big component missing here compared to much of the country is jobs. If we had more upper-management jobs, this market would be doing much better."

Whitehead pointed out that one must look at the cumulative effect of major employers downsizing to get a feel for the effect on real estate.

"When we lost Empire (of America Savings Bank), we didn't think much of it; when we lost Goldome, we didn't think much of it; when we lost Bethlehem (Steel), we didn't think much of it," Whitehead said. "But cumulatively, that was a lot of good-paying jobs. When you replace those with telemarketing postions paying $7 an hour, it's just not the same."

Symoniak said local residents need to get some confidence in the benefits of buying, and Congress might have given some oomph to that mind-set with passage earlier this year of the Taxpayer Relief Act of 1997. Specifically, allowing a household to sell its principal residence and make as much as $500,000 in profit every two years without having to worry about capital gains, could really spur the market, Symoniak and Barrett agreed.

"The capital gains change is a remarkable tax benefit," according to Symoniak. "It's a remarkable incentive for people to move."

Barrett sees a run on fixer-upper homes. "I can see people buying handyman special homes, putting in some sweat equity (making repairs themselves), holding the property for two years and then cashing out effectively tax-free," Barrett said.

The state of the nation's housing seems to be humming along. Now, if the local job market for engineers, physicians and upper-management types would perk up, that, combined with the capital gains changes, could bring Western New York up to the level of rest of the country.

We can only hope.

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