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HOUSING MARKET:
T56 housing starts stay close to '53-'54 pace
Home building is heading for about as good a year as 1953 and 1954, in spite of the fact that sales are slowing and starts have fallen 18% behind last year.
A comprehensive survey by House & Home of the nation's top housing markets has established in fact that in at least 10 of them 1956 starts are ahead of 1954.
Disappointment over 1956 stems from comparing it with
1955. Builders were told by some of their own spokesmen and government housing leaders (but not by House & Home) that 1956 would be as good, if not better, than 1955 with its 1,328,900 starts. Now, the most optimistic prediction for 1956 is 1.2 million starts. Starts seem certain to equal the 1.1 million of 1953 and 1954.
George Cline Smith, vice president and economist of the F. W. Dodge Corp. has predicted that despite the drop in starts, home building dollar volume in 1956 will be the second highest in the nation's history.
The House & Home survey showed that in 14 key market areas there were 112,028 starts in the first five months of
1956, compared to 137,269 in the same period of 1955, a drop of 18%. The 1956 total was still 1% higher than the 110,316 starts reported in the first five months of 1954, however. The survey also showed:
• Tight money has hurt home building only a little. Reports from most cities show starts are down this year because of fewer sales, not for lack of financing.
• Builders in several areas, such as Los Angeles, cut heavily into their potential 1956 sales by grabbing easy financing in 1955 notably negative no-down deals for veterans.
• Starts have declined much less in the Middle West (they even went up in Milwaukee). This is attributed to the conservative lending policies prevailing throughout the area, even during the easy money spree of last year.
• Builders are finding that buyers who put a handful of cash MIDWEST IS STRONG SPOT
down on a house are much more particular about what they buy. The salt box which would have moved quickly on a no down deal sits empty in a competitive buyer's market. On the other hand, some builders are putting up as many homes this year as they did last year. Their common denominators: good location, good design and quality.
• While overhangs of unsold new houses are high in a few places, they are low in most. And in those few spots where there are 2,000 to 3,000 unsold homes, the supply is gradually being reduced by greatly curtailed building.
• Vacancy rates among the major market areas are low in most cities and exceptionally high in none. The rate was below 1 % in several places no higher than 4% in any.
Builders owe the tight money market some credit that their sales problems are not worse.
Failing to get advance commitments and construction money earlier this year, many builders were unable to start all the houses they planned. Had they started the houses, many would undoubtedly be in inventory today, begging for buyers.
In California, where the drop in starts averages 20%, Frank S. McWilliams, chairman of the Federal Home Loan Bank of San Francisco, told his board that he welcomes the slow-down. "We have been going at high speed on the coast for several years now. This present situation is a wholesome condition." "' ; , -
Even HHFAdministrator Albert M. Cole was starting to back away from his prediction of 1.3 million units. Speaking to NAHB directors in Washington, Cole hedged for the first time by saying 1.3 will be reached only "if there is a significant increase in the flow of mortgage funds."
Home builders could take consolation from Harlow Curtice, president of General Motors. Curtice had predicted a record year for GM, only to have customers (though he blames the money market, too) stand him up. Despite lower sales, Curtice said 1956 will still be GM's third best year.
Coast to coast look at housing shows builders cautious but hopeful
Metropolitan area by area, House & Home correspondents studied US housing markets last month. This is their report:
Chicago's new home market continues strong, a fact builders attribute to the area's conservative credit policies. Starts of 17,591 for the first five months of the years are down only 7% from the 19,086 of last year. Real Estate Economist James Downs Jr. cautioned that Chicago may begin to be pinched if the mortgage market doesn't loosen up soon. Another contributor to Chicago's stable housing market is its diversified industrial base, which tends to lessen any slump.
Atlanta, with starts of 5,552 (estimated) in the first five months of the year, is down 24% from 1955's 7,339. Though sales are down, few builders regard the drop off as serious. There are no large overhangs of unsold houses.
Builders of GI housing are the only men really on edge. They fear that the end of the GI program for World War 2 vets would cut their business from 25 to 60%. Says Builder Roy D. Warren. "We're in a real buyer's market and the builder who can't give good value for the money doesn't stand a chance."
Dallas, where the building slump is sharp, reports starts down 44% from last year. Builders unanimously put the blame on the easy terms last year. Said one: "We got a lot of our 1956 sales a year early."
The shaky market has already caused some marginal builders to go out of business. It has stiffened competition so much that buyers are getting more house for the dollar than they did a year ago, despite increasing costs.
Nearly every builder has cut back. Largest reductions have been in the $11,000 to $13,000 price range. Centex Construction Co., 1955's biggest US builder, is reducing its plans from 5,000 to 2,500.
Dallas also had to face an overhang from 1955 an estimated 1,000 unsold homes. Starts for the first five months of this year were approximately 5,000 compared to 9,000 for the same period in 1955.
Detroit builders, after a notably fast start in 1956, have slowed down but are still running at a pace above the national average. Starts totaled 11,297 during the first five months of the year compared to 11,989 in the same period of 1955, a drop of only 5%.
A few small builders have been pinched out of the market this year due to difficulty in getting commitments and suitable land. Other large