Over the Peak?

When the Government drastically cut civilian materials early this year, few businessmen took a gloomier view of the future than house builders. Some estimated that the industry would be lucky to put up 600,000 houses in 1952 v. 1,090,000 in 1951. But as NPA eased materials, the estimates rose. Last week, as the first day of spring officially "opened" the construction season, builders got a pleasant surprise. Housing starts were at the rate of 950,000 a year; materials were so plentiful that builders will be able to put up all the houses they can sell. The big question now is: How many can they sell? Said Real Estate Economist Roy Wenzlick, a top expert in the field: "I think the real-estate boom is starting to get tired."

Empty Rooms. There were plenty of signs last week that in a tired boom, 950,000 houses might be too many for the market. With 6,000,000 new houses built since the war, the emergency demand, at least, seemed largely met. As in any free market, the high-priced units were the first to feel the change.

All over the nation, high-rent apartments that would have been snapped up a year ago were standing empty. People were no longer willing to pay almost any price for a place to live, especially since many of the new buildings were jerry-built or poorly designed, with windowless kitchens, green wood floors, etc.

In San Francisco, Metropolitan Life's 43-building Parkmerced apartment project hoped to fill 1,683 apartments at $115 a month and up. By last week, only 37 units were rented of the first 153 finished. In Los Angeles, one luxury apartment owner had to build a swimming pool before he could lure any tenants. Here & there across the nation, some landlords were beginning to offer rent concessions, e.g., move in now, start paying rent in May. Even in overcrowded Manhattan, new building owners were having trouble renting high-priced units ($240 and up for five rooms). On Staten Island last month, a 416-unit garden-apartment project built with Federal Housing Administration help was foreclosed by FHA because only 70% of the apartments were rented.

Empty Houses. With the pressure easing on apartments, the demand for new houses was also less; relatively few people felt they had to build in order to get a place to live. In Atlanta, dozens of new houses were on the market for weeks without a nibble; one Boston builder, now putting up 14 houses, reported that for the first time since the war half of his units under construction were unsold.

Just as in the apartment market, the high-priced new houses were the first to feel the slack. As a result, builders were switching from $25,000 and $30,000 houses to units in the $10,000 to $12,000 range. They were easier to move, but even in that bracket the buying tempo had slowed.

"Regulation Ax." With the easing rental market, apartment building has slowed to a crawl. Building costs have risen 70% in the past five years, and contractors are not willing now to risk the heavy outlay required and then find no tenants at the rents they would have to charge. House builders have another problem. They blame the slackened demand on Regulation X (they call it "Regulation Ax"), which requires down payments of 4% to 50%, and on a shortage of mortgage money. It. began to tighten up when Government bonds were unpegged a year ago, and interest rates started rising.

Marriages & Mortgages. Despite all this, most home builders think the potential demand far from satisfied. They think that if credit restrictions are relaxed, as they hope they may be soon, buyers will swarm back into the market. They are also hopeful that mortgage money will become plentiful again--and it looks as if it will. One reason: savings accounts are rising abnormally, and since interest rates paid on them are also going up, banks will have to put the money to work.

Nevertheless, the fact is that the frenzied building of the past six years has just about eliminated the war-caused backlog, and new demand based on population growth is slowing down. Last year the marriage rate was 30% below 1946. It is expected to keep dropping for another five years at least--and house building with it--until World War II's crop of babies grows up and starts getting married.

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