Glum but Hopeful

The glummest businessmen in the U.S. last week seemed to be U.S. home builders, frustrated and disappointed at the sag in one of the key U.S. industries. From the Commerce Department came word that February housing starts, which normally rise over January, fell 8% to a rate of 1,115,000 units on a seasonally adjusted basis. Even worse than the hard facts was the uncertainty about where the industry was going. Some housing experts, such as Federal Housing Administrator Norman P. Mason, still expect a 1.2 million year, which would make a good if not a record year. Others are less optimistic about prospects, predict declines of 15% or more from last year's 1.3 million starts.

Who Is the Villain? Not all areas of the country are being affected in the same way. The Florida building boom is as clamorous as ever. Housing starts in Boston are running well ahead of last year, and Chicago's building starts held firm in February at January levels. But Cleveland and Denver builders report business down about 10%, and some builders in Westchester County and Long Island, on New York City's fringes, expect new homes to drop up to 30% below last year. Home building in Southern California is down about 20% for the year, and both Detroit and Atlanta builders are running well behind 1959.

For many builders, the biggest villain of the slump is tight money. Though money has eased somewhat, building plans that would ordinarily be going into effect now have been postponed or dropped because of the difficulty of getting money to back them, even at a high 6% interest. "As long as money is tight," says Alex Bruscino, one of Cleveland's biggest home builders, "the housing business will continue downward." Many builders also insist--despite the Government's refusal to blame the housing slump on the weather--that winter storms badly damaged their business. Says Edward T. Rice, executive vice president of Denver's Home Builders Association: "We had anticipated a decline due to hard money, but of course we were not able to anticipate the severity of the winter."

Leaving Out Gimmicks. Not all builders agree that tight money and the weather are wholly to blame for the industry's ills. Some fear that the housing industry is pricing itself out of the market with elaborate, cost-laden homes that many potential home buyers cannot afford. Says Milton J. Brock Jr., former president of the Southern California Home Builders Association, who has cut prices on his homes by leaving out many built-in gimmicks that the buyer can later install himself: "The main thing is to put the buyer in a house. Every time we try to build houses that cost $17,000 or $18,000 instead of $12,000 or $13,000, we've priced ourselves right out of the biggest market. Building houses is like building automobiles. You sell more Fords than Buicks and more Buicks than Cadillacs. It's time more builders realized this."

Despite the home builders' gloom, a traditional spring surge in construction could quickly change the outlook. Says Housing Administrator Mason: "The money situation has definitely improved, and I expect a fairly rapid upswing two or three months from now in home building. It takes some time before builders find that money is more available and then translate that finding into new building plans and actual operation." As proof that many builders are bracing for the possibility of a spring upsurge, the Federal Housing Administration reported that applications for mortgage insurance on new loans rose 30% in February, and the Veterans' Administration said that February requests for appraisals of proposed new homes showed the biggest monthly hike since last June.

This file is automatically generated by a robot program, so reader's discretion is required.