Fed helps home builders nail another record year.

• Position: Residential real estate

The long-predicted residential real-estate slowdown appeared ready to hit in September, after the stock market stumbled. Realtors' phones stopped ringing. Then the Federal Reserve stepped in three times with quarter-point interest-rate cuts, which brought down mortgages.

Ted Kelly, president of the North Carolina Realtors Association, says those phones started ringing almost immediately. "The overall condition of business has been up in every major market," Kelly says, and he anticipates it staying that way.

Home builders were on track to deliver a record number of new homes in 1998. Mark Vitner, economist at First Union Corp. in Charlotte, estimates the state finished the year with more than 60,000 permits for new single-family homes, up about 10% over 1997, which was also a record year.

Overbuilding? Not a chance, Vitner says. "Some people are concerned when they see the high level of residential construction," he says. "But for the most part, it is just keeping up with demand. The rate of growth doesn't bother me."

Bernard Helm, president of Market Opportunity Research Enterprises in Rocky Mount, isn't as sanguine. Helm, who tracks North Carolina residential real estate, says builders need to watch buying trends in 1999. The market may look strong now, but it is very sensitive to economic shifts, as the lull in September showed. "If a builder has any excess inventory, it is going to be a lot easier for him to get rid of it now than six months from now," Helm says.

Resales are up. The National Association of Realtors projects they will exceed 250,000 by year end, about 9.6% over the 228,000 in 1997, which was a 7.3% increase from the year before.

Apartment construction hasn't been as robust. For the first six months of 1998, multifamily permits were off 13% in the Charlotte market and 11% in the Raleigh-Durham metro area. The slowdown was welcome news to analysts who worried builders were overdoing it in 1997. The industry pulled off a bit of a soft landing.

What triggered the slowdown was a shortage of financing. Hit by international losses, the nation's largest banks tightened lending in apartment construction. Because of the credit crunch and subsequent slowdown, vacancy rates stayed low. Higher-end units could still land financing.

Charlotte-based Summit Properties Inc., developer of apartments throughout the Southeast, posted strong earnings growth, improved occupancy and higher revenues through the first three quarters of 1998...