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NATIONAL ASSOCIATION OF REAL ESTATE BOARDS HERBERT 1737 HK" Street, N. W* u. N E L S O N EXECUTIVE VICE PRESIDENT 22 WEST MONROE ST. CHICAGO 3 W&8hingt0n 6 , - -• 1 QAK o J u i y ^ , xyftD D. C. Mr. Marriner Eccles Chairman, Federal Reserve Board Constitution Avenue "between 20th. and 21st Streets, N.W. Washington, D. C* My dear Mr. Eccles: On Saturday, June 30, Mr. John Mowbray, chairman of our policy committee, and I had an interview with Mr* William Davis of the Office of Economic Stabilization The points we discussed with him concerning the real estate market are similar to those which I had the privilege of reviewing "briefly with you. Mr. Davis had visited with our committee the previous week and had asked for our suggestions. We, therefore, gave them to him on Saturday and I am enclosing a "brief memorandum which summarizes the points reviewed. I would like very much to talk over these points with you whmand if you think such a discussion would "be useful. I am going to Chicago for a few days laut will "be "back in about a week. Very sincerely yours, Executive Vice President Enclosures July 11, 1945* Mr. Herbert U. kelson, Executive Vice President, National Association of Real Estate Boards, 1737 K Street, Northwest, Washington 6, D. C. Dear Mr. Nelson: AS Mr. Iccies is temporarily out of the city, 1 wish to acknowledge on his behalf your letter of July 2 in regard to your interview with Mr. Davis of the Office of Economic stabilization. Your thoughtfulness in enclosing a copy of the memorandum which you left with him is very much appreciated. I am not certain exactly as to when Mr. Eccles will be back in his office as he is on a necessary trip in theftestwhich may keep him out of town for several weeks. Sincerely yours, Elliott Thurston, Assistant to the Chairman. ET:b June 30, 1945 MEMORAHDOM CONCERNING PROPOSED CONTROLS BY GOVERNMENT OVER THE REAL &STATE MARKBT IN ORDER 10 PREVENT imJOlW: Discussed with Economic Stabilizer William Davis The National Association of Heal Estate Boards conducts a semi-annual survey of twenty years1 standing which has always revealed facts candidly and completely. We have just finished such a survey covering 348 cities* The facts show clearly that real estate market activity is receding; listings are harder and harder to get; prices are leveling off and in some places actually dropping; and sales prices on homes throughout the nation are still six per cent below current reproduction costs* The Association, therefore, believes that at this time there is no need of any control over the real estate market and that if controls are imposed at this time it can only result in increased shortage of living and other facilities* Should there in future bo evidence of a runaway inflation in real estate and should the government at that time determine to impose controls, we suggest that the following considerations be kept in mind: 1. That under the Federal Revenue Act the holding period for any capital asset be extended from six months to one year if the seller is to receive advantage of the capital gains rate of taxation* We do not believe, howeverf that any increase in the capital gains rate is necessary and that the regular brackets of the income tax operating within the one-year period \*ill constitute a sufficient restraint* 2. If federal controls in the form of increased down payments in the case of sales of homes, farms and other properties are to be applied, we suggest that these be made applicable only to re-sales made within one year after acquisition of the property. This will go far towards slowing down speculative turnover. At the same time, it will not constitute an obstacle to the initial purchaser of a home or a farm. We believe that while people have adequate funds no obstacle should be placed in the way of farm or home acquisition and that whatever the future trend of the real estate market might be, it is better for thousands to make farm and home purchases at present than to seek other investments whoso fluctuations in value may well be much greater. Moreover, if a regulation of this kind be adopted, we suggest further that there be a hardship clause granting certain exemptions under the rule in the case of involuntary re-sales. There are many employees of government and industry who are these days moved from one city to another in connection with their work and who are, therefore, forced to sell their homes. We do not believe that obstacles should be placed in the way of such enforced sales* 3.We suggest further that credit controls exempt all purchases of land for home building and for new construction. - 2 It is obvious that the purchase of a lot is a first step towards building a home or other structure* Any obstacles placed in the way of land purchases for immediate postwar building purposes will place a very definite obstacle in the way of new construction. It is obvious, also, that the purchase of new construction and for remodeling for first occupancy, whether it be a home or a business structure or an apartment building, should not be under any credit controls. We believe everyone is in agreement with the idea that the only cure for present shortages in homes and in structures of all kinds is the encouragement of a broad building program, which will provide millions of jobs. 4# We suggest further that refinancing operations, where there is no change in ownership, be not subjected to any credit controls. Such operations go on constantly where mortgages are reduced or where they are increased for good reasons, and freedom of movement in this area is essential to the life of the market• 5* We suggest that the 035 and other government agencies render all possible assistance in getting lumber and other needed material released at the earliest feasible moment so as to advance and stimulate new building. We do not feel that present spokesmen for home building within the government have been sufficiently aggressive in presenting the urgent requirements of the public in this matter. Moreover, the whole issue of new building has becone entangled with ideological questions concerning public housing, which at best affects only one or two per cent of the construction market, to the great detriment of the entire private building narket. 6t We also wish to ask consideration for the basic economic fact that expansion of civilian activity in the real estate and home building field requires encouragement to venture capital. There can be no sound expansion without a certain amount of speculation in which people may incur both gains and losses. The selection of sites for development involves risks with respect to the future of the community, the direction of its growth, the earnings of its population. If attempt is made to restrict credit in such way as to prohibit all speculation by private individuals, the result will be that in order to meet the public need the government itself must become the speculator, as has been the case in the provision of war housing. The imposition of controls on the real estate market, therefore, presents problems of the greatest importance and delicacy. If the controls be overdone the market will be strangled* 7. We suggest finally that any controls with respect to credit which may be contemplated should be applied where, when and how needed. The tendency in federal government to blanket the tntire nation with standardized regulations and with uniform administration will utterly destroy the real estate narket. The real estate market is highly local in character and lack of recognition of this fact would be *nost serious. We also urge that if regulation of credit is attempted there be created an advisory board from anong persons who understand the real estate market. If regulations are to work they must be administered by men in whom the real estate industry as a whole feels confidence and whose judgment would be trusted.
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