View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Koreaber 21, 19^7
Chairman Eccles
Ramsay Vood

I n f l a t i o n a r y aspects o f
r e s i d e n t i a l b u i l d i n g and mortgage lending

I n accordance w i t h your request, t r a n s m i t t e d through
Mr* Thomas, I have prepared the attached memoranda* and t a b l e s on
i n f l a t i o n a r y aspects o f r e s i d e n t i a l b u i l d i n g and mortgage lending*
I hope t o have s o w a d d i t i o n a l m a t e r i a l on Ifcnday*
I am also a t t a c h i n g a copy of a atatenant s e n t t o
Dr* Jack L e v i n f o r t h e use o f Senator Flanders * Subcomittee on
Cost Factors and Co*t deduction i n Housing*

Att&chaeirfc*




BFLAtlC&ARY ASPECtS OP RES IKES TIAL EJILE/ESO
AND HOETOAOE LB8&IJSG

gyflfflffy
5he c u r r e n t housing shortage oan be a l l e v i a t e d only I n
p a r t by production o f heusing* The dewnd f o r bousing a t c u r r e n t
p r i s e s i s §0 ffar I n exoess o f the supply o f houses a v a i l a b l e
p l u s what osn be b u i l t q u i c k l y * t h a t * I f o o r r e e t i v e »sasure* are
n e t taken* i n f l a t i o n a r y pressure* w i l l p e r s i s t I n t h i s p a r t o f
t h e economy u n t i l p r i o e s have been pushed1 up t o t h e p o i n t a t whloh
few f a m i l i e s con a f f o r d t o buy*
$h* volume o f r e s i d e n t i a l b u i l d i n g I s already I n excess
o f eapaoity a t e t a b l e coats* end costs h a w r i s e n * t h e resent
s t a b i l i s i n g o f e e t t * i e a t t r i b u t a b l e I n large part t o a better
f l o w o f m a t e r i a l s during t h e suaser* and a oensequent iraproveasnt
I n e f f i c i e n c y on t h e job« Shortage* are * g a i n appearing* h o w v e r *
end p r i c e s o f o a t e r l a l * and wage r a t e * have eontinued t o advance*
The deaand f o r housing l e being supported by t h e l a r g e
volums o f r e a d i l y a v a i l a b l e c r e d i t * Over h a l f o f t h e mortgage
c r e d i t being extended i e sponsored i n m m f a s h i o n by the Federal
Oeverniaent* s a d a n a d d i t i o n a l p o r t i o n l e a m i a b l e t o e o m Federal
c o n t r o l * I t eee&s d e e l r a b l o t h a t steps be t a k e n t o c u r t a i l as m o h
as possible t h e a v a i l a b i l i t y o f c r e d i t * e s p e c i a l l y t h a t u n d e r w r i t t e n
i y t h e f e d e r a l Sovernaiont *

fhe YOlttsse Of b u i l d i n g
R e s i d e n t i a l b u i l d i n g has increased markedly I n the past
two years* as $*bles 1 and
show* Hie predominant f e e l i n g * both
I n Federal housing agencies and I n t r a d e o i r e l e e * i s t h a t t h e
housing shortage w i l l be oared only by c o n t i n u i n g , o r increasing*
t h e e u r r e n t r a t e o f b u i l d i n g * and t h a t toy attempt t o r e s t r l o t
Mortgage c r e d i t w i l l reduce b u i l d i n g * stake t h e housing shortage worse*
and add t o I n f l a t i o n a r y pressures*
A c t u a l l y * i t would probably bo b e t t e r t o reduee somewhat
t h e e u r r e n t r a t e o f r e s i d e n t i a l b u i l d i n g * I f * a t t h e ease t i n e *
measures were adopted t o reduce t h e densnd f o r housing i n the ®erket*
We are now probably b u i l d i n g beyond our capacity*
fhe argument t h a t
ww a r o b u i l d i n g fewer houses I n 19k? t h a n I n 19S& overlooks t h e f a c t
t h a t t h e r l e o I n t h e e a r l y 1920*e was n o r * gradual t h a n i n t h e l a s t
t h r o e y e a r s * and t h a t * i n the e a r l i e r p e r i o d * t h e whole eoonony had
tisNS t o a d j u s t t o the higher l o v e i o f b u i l d i n g I t a l s o overlooks
t h e ftiot t h a t l a a c y o f t h e worst bouses b u i l t i n tho l $ 2 0 f s were




g
b u i l t 1» 1925 and 1936*

m

tho f a c t t h & t t t o 1925 r a t o was n o t

£*ridonoo t h a t wo a r o t r y i n g t o b u i l d too *uob i s t o be
found i n tho f a o t t h a t ,
Sablo 1-A ahoara* tho nuiabor o f u n f i n i a h o d
bousoa tea hson inoroasing a l o o a t w i t h o u t i n t e r r u p t i o n * The wide*
sprsad oomglainta o f ahortagos o f n a i l s * o u t i r o n pipo* shoot
s t o o l * saill-work* and s i m i l a r i t o s a * and t b o "gray market* f o r
n a i l s * s t o o l * and lumbor (aoae o f whiob aro laantionod i n the attaobad
Soto* on B u i l d i n g Matorials Supplioa) aro f u r t h e r ©*idonoo t h a t
aupplying i n d u a t r i o s oannot* a t prosont, aupport t h o ourront l o r a l
o f biailding* Tfca q u a l i t y o f b u i l d i n g i s A t o d o o l i n i n g * m d t h *
Votorana A d & i # l a t r a t i o a has had t o i a s t i t u t o an i n s p e c t i o n procedure f o r now houses b u i l t w i t h guarantood or insured loans*
gort^ago loading
Probably t h o l&rgpst s i n g l o f a c t o r roaponaiblo f o r tho
preaont i & f l a t i o i m r y boom* aoido from tho Inadoquaoy o f tho bouaing
t u p p l y * i t t h o a v a i l a b i l i t y o f oasy o r o d i t * A groat laany faxailioa
w o onoouragod t o b o l i o v o t h a t t b o y oon ittprora t b o i r bouaing
ooaditiona boaauoo tboy oan borrow on oasy t o r a a * and t m i l o t h o
nuabar o f p o t o n t i s l buyer* roaming l a r g o * b u i l d o r a bavo l i t t l o i a *
oontivo t o hold t h e i r oosto down* Tho volumo o f mortgage l a d i n g baa
boon inoroasing* a i d tbo g r o a t b u l k o f t h i s l o a d i n g i s on o l d bousos*
f a d i n g aponaorod by t h o i ^ d o r a l aovernaont baa boon in~
oroaaing* b o t h i n aaount* and i n p r o p o r t i o n t o t b o t o t a l * aa
l a b i a £ shows* Sioro i s aoao d u p l i c a t i o n i n th» t a b l o * sinoo tho
loan* o f inaurod savings and l o a n associations inoludo loans
inaurod by t b o Fodoral Housing A d m i n i s t r a t i o n and inaurod o r
gparantood by tho Votoraa* Ada&nistratioa* I t i a n o t o l o a r * howevar*
t h a t * i f IHA and VA guarantors woro not a v a i l a b l o t b o t o t a l o f loans
aado by inaurod aaaooiationa would bava boon a u b a t a n t i a l l y loaa*
A gonaral r o d u o t i o a o f t b o a v a i l a b i l i t y o f aortgago o r o d i t
would roduoo t b o daasnd f o r bousing — b o t h o l d and now — and* i f
i t woro H i t too sanoiw* would b o l d doxtand t o a l e v o l whioh would
p o r a i t t b o l a r g e s t toluiso o f b u i l d i n g oonsistont w i t h roaaonablo
s t a b i l i t y o f oosto and prioos* I f o r o d i t i a s o t c u r t a i l o d * thoro i s
a s o r i o u * dangor t h a t h o m i n g w i l l bo " f r & d out o f tbo « a r k o t * *
I t aoosa w i s o r t o o u r t a i l b u i l d i n g s l i g h t l y I n tbo naxt fair isontba,
i f nooosaary» and zaako poaaiblo siaro s t a b l o b u i l d i n g f o r a longar
poriod*
00sts» wbiob w i l l r o s n l t i n a oosaation o f b u i l d i n g bolero tbo bousing
s u f f l j r tea boon inai^Maod a p f r o o i a ^ y *







Hon-fam l u l l i n g Units S t a r t i d
i a tha H o l t * & States
(Thouaania)

Year

Total

1522
1923

tU

l$2h

693

1925

931

bu

1926

im
mo

m

1933
1936

330
93
31*

1^1

T15

3Stkk

1&9

1&U3
W
e / EsUnated

776
860 j /

f*U«

Xmk

pqfraftmat Hew Konfara f t o l l y BjwilJLtog U n i t *
' (to

ir 1L

Foriod

r ur r
"
starts

Vl

Complofcod

^Jailor ooiuitruet&W
o f period)

Monthly
January
lofcruwy
&troh
April
Ifiiy
Jim*
July
Aug!**t
Soptoa&or
Ootobor

33
148
62
67
6?
&
63
65
58
58

16
17
19
£1
85
31
37
i*3
50

Dooos&or

39

63

370

Joauory
JObruojry
Jftureh
April

1*0

63
60
58
60
60
63
66
70
77
02

3^7
331

Uovmaher

Juno
July
Au^uat
Septoabor
October

160
IS5
2S3
S7lf
516
3h9
375
397
Ij05
W

61

58
69
73
77
80
66
92

3&
366
3^2
398
W3
1*23

H o t o * ^ I ) a t * from i3ep*rt*ottt o f tobor* Owly **•* joraonoiffc f o a i l y
d w o l l l n g u n i t * b u l l * I n mnfmrm oroo* w o roprooontod, l a *
oludlng u n i t * financed witfc p u b l i c &m&§ m i
h privoto
fttfidi. and u n i t s b a i l t b f
u t t o d i and v l t k
varying m o u n t * o f p r o f a b r l o o t l o * * Single porton 0000*10$**
t l o n a * o o f t r o r o l o K * t r o l l or*» ond a l l toiaporary «tructuroo
oro oxoludod#




TftfeU 2
Sow tSMrtgog* Lo«na Wts6»
F»&»r*l Spttuorohip
1 - t o - U f t t a i l y &ou««»
(Amounts i n Millions o f dollar®)

All
Sot*l

vm
im

2*873

3,810
4*701
9J&3
11,000

I9k5

I m m m&m under Federal *]po&aorahip
A**O0l*tlO&ft
Ina* by
l o t * by Fed*
Saving* and
pedoral
P«*ro<mt o f
l oan ins*
Boutins
mil l0«QS
Corporation
ttftdO

1,250
1*775
2,023
5*523
7,05k

19U7 <5/

*/"

i*7
k3

501
esj
1M9

2*799
£*922

669
890
474
ijffg
830

Ins* or
guaranteed

100
2,302
3,302

Eatta&ted by I W « f » l Re»©rro

Botef-HLoea* iaad® by tsgocittior-s insured by the Federal Savinge end L<xm Iwuwmee
Corporation ineludo i o m loan* iaaurod by
Federal iioueiag, A & i a i s t * »
tion
incmred or goareateed t y tbo Veteran* A&ainietxmtioa* l a
•uoh loam saiy
aaounted t o about on* b i l l i o n dollars* I f euofe
duplicfctio© could bo e l i a i m t o d , t i e proportion of A l l loatui aide u r t t o
federal sponsorship, aigbt 1m about 50 per ©eat i a 192*6
55 V*r oont
to




soxss m saxmrn

sjppliss

mmms

S t f t t s o a t f h a w a s o n n d i s UM I M M

l a praaalag hard upca a v & i l a b l a ©ttfipliaa.

tzslB ioon&Ia

Xfca S a t i o a a l Aaaoelatloa

o f Heal Xat&ta Boorda r e p c r t a d l a a atanroy o f acBO 300 c l t i e a t h a t
c m s t r u e t l o i l a uai&g up b u l l d l a g isafcariale aa t m % aa praaaat
f a o t o i y ospaolty o n produce thenu n
short

Specific m t e r l a l a raportad l a

in £xm m a ^ h a l f t o tvo~ t h i r d * o f tha c i t i a a vara

-

J^^^^fii^^LXi^JI' ^B^jl^i^LjpJB^PBi^fl ^ J E D t
P^^

l a t h , aolaar&l

toll

ho&rd^

f u r t h a r i n d i c a t i o n o f tho $raaaura o f daaa&d f o r I m l l d l o a
m a t e r i a l s oa auppljr

g i v a a "by tha H u t i b l n g and S e a l i n g l a & a a t r l a a

Buraaa, apo&aaossutt f o r tha oos&l&ad i a d u a t r l a s , i & i c h ravaalad t h a t
although production o f paumbias a^uipisaat t h l a yaar will

prohafcly

fea t h a highasfc ©a raoor&> dwwnA l a soatfauiag ao a t r c a g t h a t
sappliea a r t a t t l l

laado^ta*

L o c a l fculldiiag s & t e r l a l a daalara is* the W^ahl&gtoa araa
r e p o r t t h a t n a i l a , r o c k l a t h , lusfcar, t r i c k y aorfcar* aad c « n m t
a r a t h a itama l a ehortaat aupply.

Tha l o c a l ahortagaa o f cmmxt

i^nd lus&ar r e f l a c t n o t o a l y atroag dt&asda o f t h a cona t r u e t i o a
iaduatsy h u t a l a o t h a f r a l g h t c a r
fha iHiilAiag
•praoiua' a a r k a t . *

ttatorlal

tfhsrtaga*

ifeortaga haa m l * a d tha *hlaek o r

A l o c a l d a a l a r haa r a p o r t a d r a c a i Y i q g o f f a r a

o f m m m a l thouaaad kaaa o f n a l l a a t




fim

1 ) 2 t o #15 a

iAm

ibo * i o g i t i m t o mifcot jarieo* vaa $8.93 a kog» tuabor pricoa ftava
risen to no* bigh lovolo v l t b doaloro m i x i n g to pogr proa&ua
pricoo fofr quick dolivery,

Ae ono Vest Coaat luaonaan raporfcod,

aro &otarmlno& tboao daya V ftflftlag oomotMng to tfco loot
rumors prioo of n eorqpotitor*
oajr prico**

Buyoro ooon t o bo m i x i n g to pojr

t h i s toXXiag l a rofXoetod* t o r owkskXo, I n tho price

o P two by fours m%
e

Coaat adlXo, n w soiling f o r #73 50 por

thousand board f o o t , doublo tho Xaoi CPA colling prieo ^afc oco^arod
vltli




$bO 1ml

Jfej aa*& #60 JUx August*