Back to Normal

After 15 years of building as if there were no tomorrow, the U.S. has over come the postwar building shortage caused by a burgeoning population and expanding business. In Chicago last week, at a meeting of realtors from across the U.S. and 20 foreign countries, officials calculated the value of residential real estate in the U.S. at half a trillion dollars -- about a quarter of the nation's total wealth. They could only guess at the value of the office buildings, stores and shopping centers that have also proliferated since the war. The big economic effect of all this construction is that the real estate market, which has had its own form of inflation for years, has returned to a normal, reasonably balanced state of supply and demand.

Stiffer Competition. Though real estate prices have softened, no great fall-off is in view; the steady population growth will prevent that. But the leveling off of demand means stiffer competition all around. Apartment buildings have sprung up so fast in such metropolitan areas as New York, Denver and Chicago that builders are forced to offer special inducements to prospective tenants and must be content with higher vacancy rates than in the past; apartments in Manhattan luxury buildings are going begging and some landlords are offering concessions of up to six months' free rent on a three-year lease.

Says an official of the National Association of Real Estate Boards: "At no time since the '30s has there been such a wide variety of apartments available for occupancy." Office building space is also plentiful.

New York has so many office buildings going up that some realtors feel that it could take until 1967 to fill them. Across the U.S., the number of office buildings with 10% or more vacancy has jumped from 18.6% last year to 26.3% in 1963. As for homes, any developer today who is rash enough to build 200 houses on a suburban tract runs the risk of bankruptcy before he sells them; in Denver, several marginal builders have already gone bankrupt. Yet the demand for homes is up this year in nearly half the U.S., and for a good reason: prices have become more reasonable. A recent survey by the national real estate group showed that homes in the $12,000-$20,000 range are priced lower this year in 40% of the communities surveyed; in the $20,000-plus category, they were lower in 50% of the communities.

Grief to Syndicators. Real estate's return to normalcy has brought grief to many thinly financed syndicators who have long counted on inflation, quick depreciation write-offs and big revenues from full occupancy to keep them going. New York Syndicator Louis J. Glickman was recently pushed out of his own company when his creditors closed in and forced its reorganization. Sidney Schwartz, a fast-stepping New Yorker who in five years promoted 23 syndicates from Oregon to Florida, got caught by the softening market; he has been accused by the New York State attorney general of juggling his funds to keep his syndicates going, was barred from selling securities in New York. The troubles of the syndicators have caused crises for such as Manhattan Real Estate Tycoon William Zeckendorf, who finds it harder to peddle real estate to them when he needs cash; last week he announced that he will resort to public auction to sell off some of his New York properties.

Anyone who hopes to make money in big real estate ventures in the future will have to have enough financial strength to be able to wait a long time for his investment to pay off. It may well be that the days are over when such brash showmen as Zeckendorf could parlay a small stake into millions. The real estate entrepreneurs of the future are likely to be found among insurance companies (which now invest about 3% of their total assets in real estate) and big institutional investors, who will have success simply because they can afford to wait for it.

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