Sick Industry

"Senator," said the forlorn constituent calling on Montana's Mike Mans field at the majority leader's Washington office, "I've never been East before, never spoken to a Congressman, and can't afford this trip. So you can appreciate that I've got a serious complaint."

The complaint that he and about 530 other home builders from around the U.S. brought before their Congressmen last week in a one-day lobbying visit was simple: their industry is in a perilous condition. Competition for deposits between commercial banks, which lend primarily to business, and savings institutions, which lend mortgage money, has grown so fierce that the supply of mortgage funds is dwindling and higher interest rates are scaring away home buyers.

For any Congressman who doubted it, the home builders could offer a store house of statistics. The Federal Home Loan Bank Board reported that new-home mortgage rates climbed in June for the sixth straight month. The average U.S. rate on new homes is now 6.07% ; it has gone as high as 6.51% in Houston, 6.55% in San Francisco and 6.6% in Atlanta. June housing starts were down 18% from a year ago. Building permits, which give an indication of what is to come, are down 25% . F. W. Dodge Co., surveying six-month activity in the construction industry, re ported that while total building is up 8% over the first six months of 1965, residential building has dropped 1 % be cause of "the mortgage gap." This year, predicted Dodge, 1,425,000 private, nonfarm homes will be built, a drop of 100,000 from earlier estimates.

Circulating through Capitol corridors last week, home builders talked of their troubles in local terms. Calling on Senators Thruston Morton and John Sherman Cooper, a delegation of 40 Kentuckians reported that single-family building permits were off by 36% in Louisville so far this year. Pittsburgh Builder Roland Catarinella called the low-income housing market back home "100% dead," said he had canceled construction of a 100-apartment project. William Harvey of Bettendorf, Iowa, said he had lopped five men off his 30-man payroll, and even at that was just about covering overhead. "When it becomes more than I can afford," he said bitterly, "I'm going to say the hell with it for two or three years."

With elections coming in the fall, no Congressman was indifferent to such complaints. Neither was President Johnson, who received a delegation led by National Association of Home Builders President Larry Blackmon, a fellow Texan. And along with soothing promises, some action was under way.

Congressman Wright Patman's House Banking Committee approved a bill that, among other things, allows the Federal Reserve flexibility to 1) set varying rate ceilings on different classes and amounts of time deposits; 2) raise bank reserve requirements against time deposits; and 3) pump money into the mortgage market by purchasing the obligations of the Federal National Mortgage Association and the Home Loan Banks. The Senate did as well: a subcommittee headed by Alabama's John Sparkman voted to give the FNMA, familiarly known as Fannie Mae, $2 billion in new borrowing authority.

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