CONGRESSIONAL STUDY SUMS UP HOUSING CRISIS DIFFERENTLY

Forget those "Housing Now!" marches by the homeless on Capitol Hill. Don't believe what you read about the soaring costs of buying a first home. The "housing affordability crisis" is overhyped, blown out of proportion by the media and the real estate lobby.

That is the gist of a provocative new congressional study on home costs, triggered by legislative efforts to expand federal housing aid and set higher loan limits for Federal Housing Administration mortgage insurance.

The study, which hasn't been released to the public, comes from the Congressional Research Service, Congress's own in-house think-tank on public policy.

A report by the same organization earlier this year marshalled arguments against proposed legislative increases in the FHA mortgage limit. Those arguments have been used extensively on Capitol Hill to counter efforts to increase FHA mortgage ceilings in high-cost areas like California, New York, New England, New Jersey, the Washington area and other major markets.

The latest study blames the news media for "often inappropriately" picturing rising housing costs nationwide, worrying readers about "how hard it is to buy a first home." The statistical fact, the report argues, is that housing prices today are not really that much more expensive than they were in the mid-1960s, the 1970s or earlier in the 1980s.

All you have to do is subtract inflation from their price tags, and squeeze out all the extra amenity costs for air conditioning, extra bathrooms, spas and fireplaces, and you'll find that 1989's new house isn't that out of line with 1970's new house.

Here's why, according to the study:

Today's new homes are "bigger and better" than ever. While the median square footage of new homes a decade ago was 1,655 square feet, new homes now have an additional 155 square feet bigger.

Today's new houses come with more bathrooms: 42 percent of new homes have more than 2.5 of them, compared with 25 percent a decade ago.

Admittedly, bedroom numbers are down from their peak in 1978. In that year, 88 percent of all new homes had three or more bedrooms. Now 82 percent do.

Fireplaces are up by a notch: 64 percent of new homes in 1978 had at least one; 65 percent do today.

But central air conditioning is definitely hot: Three-quarters of all newly built homes last year had it, a big jump over the 58 percent in 1978.

Garages with one or more spaces also are part of the cost-increase equation: 79 percent of new houses last year came with a garage, up from 74 percent a decade ago.

To understand why housing costs haven't gone up as much as they appear to, the report suggests taking a long, hard look at what's known among housing economists as the "1982 house." This is a U.S. Census Bureau concept that takes 10 "important" characteristics of new homes sold in 1982 and holds them theoretically constant for various years before and after 1982. The constant characteristics include floor area, number of bathrooms, fireplaces, air conditioning and size of lot, among others.

By using this analytical tool, according to the study, one can time-warp housing prices back to 1963, when a "1982 house" would have sold for $22,700, a premium price compared with 1963's average sale price of $19,300. By the same token, a new "1982 house" today would go for just $101,200, a bargain compared with the $145,500 actual average price of a new home nationwide in 1988.

Home buyers in markets that the rest of the country considers high-cost may be especially misinformed when they complain about skyrocketing housing prices and lack of affordability.

San Francisco, for instance, "is often cited as a prime example of a place where many people, particularly young people, have been priced out of home ownership ... {yet} when size, quality and inflation are accounted for," the study says, "existing single-family homes {in the San Francisco Bay area} increased in price by less than 1 percent between 1981 and 1986."

In Chicago during the same period, "real" prices actually dropped by 3.4 percent, the congressional study insists. In fast-growing Atlanta, they rose only 4.5 percent. The upshot: As long as you live in markets like these, and can locate a "constant quality" house with eight-year-old amenities that have been frozen in time, and can convince the seller to squeeze out every trace of Consumer Price Index inflation from his asking price, you ought to be in good shape as a home buyer this year.

Fortified with such fresh economic insights from Capitol Hill's policy think tank, you'll be ready to knock heads in this fall's housing market.

At least until you wake up from your dream.

Articles appear as they were originally printed in The Washington Post and may not include subsequent corrections.