Rising Residences

In 1934, more U. S. houses burned down than were put up. This strange condition resulted from no outburst of pyromania, but from an almost complete stoppage in U. S. housebuilding. In 1925, new homes were built for nearly 500,000 families. In 1934, only 22,000 families were provided with new shelter. Yet even in Depression, which brings fewer marriages and a lower birth rate, the U. S. population was increasing at the rate of about 400,000 families a year. Result: an acute housing shortage demonstrated by the fact that U. S. residences are now only 4% vacant, while U. S. office buildings are 26% vacant.

A need for new houses does not mean much unless it is accompanied by the ability to pay for new houses. In the first three months of 1935, contracts for new houses rose above 1934 figures but were still pitifully small. Since April new houses have been put up at better than twice the 1934 rate. Last month residential contracts totaled $55,100,000 against $26.300,000 in October 1934. Builders estimate that in 1935 U. S. homemakers will spend $500,000,000, which will be a $250,000,000 increase over 1934. Yet even this substantial increase will not house more than 60,000 families, will leave the newhouse census still far behind the census of new families.

So it is to 1936--and to the remaining years of the Thirties--that builders look for a truly resounding boom. A prime factor in this boom should be the Federal Housing Administration with its new program of insured mortgages. The FHA plan offers 20-year insured mortgages at 5%, plus charges on up to 80% of the appraised value of the property. It practically eliminates second mortgages and expensive renewals of short-term first mortgages. It supplies a safe 5% investment to a tremendous volume of surplus U. S. funds. Under a trustee arrangement, it permits bankers and brokers to buy and sell these mortgages, thus making real estate mortgages more marketable than they have ever previously been.

The FHA insurance applies not only to small houses (mortgaged for not more than $16,000), but also to large apartment house developments with valuations running up to $10,000,000. But these large apartments must rent at low cost ($10 to $15 a room), must be "limited dividend" operations with the promoter restricting himself to a 6% profit. Most conspicuous example of FHA insurance on a large scale is a Joseph P. Day Brooklyn development (TIME, April 15), on which New York Life Insurance Co. holds a $5,000,000 insured mortgage. Applications for mortgage insurance on large apartments have thus far totaled $365,000,000. Of these applications, 10% have been approved, 50% rejected, 40% are pending. Applications in the $16,000 class have generally been granted, to date amount to some $219,000,000. The high mortality in applications for large mortgages is a limiting factor in FHA's ability to promote a building boom. But in normal times, one-family and two-family houses account for 60% of the dollar volume of U. S. residences. Thus FHA insurance remains a potent tonic for U. S. building. With Government backing added to general recovery, many a builder looks forward to 1936 residential contracts totaling $1,000,000,000. And the next five years should see new accommodations for at least 250,000 families a year.

Biggest current revivals are at Washington, D. C., where there are more New Dealers than houses to hold them; Miami, Fla., which is manufacturing a small edition of its 1925 boom; Houston. Tex., which escaped the general housing slump through the discovery of the new East Texas oil fields in 1930. Greatest activity lies in houses priced at around $7,500. About one-third of new houses are Colonial; about one-fifth English. The Modern House (about one-seventh of the total) has been a laggard and the Prefabricated House is still in the future. There has been no revival in skyscrapers, and public works have been running about 20% under 1934 totals, chiefly because the Public Works Administration has been slow in deciding what to do with its money. But since June, public works expenditures have run ahead of 1934. PWA is expected to get nearly $1,000,000,000 in circulation in 1936.

Among notable corporate gainers from increased building activity have been: U. S. Gypsum, which last week declared an extra dividend of 50-c-, following a similar extra declared Oct. 1. As Gypsum supplies more than 50% of all gypsum plaster and wallboard. and about 25% of metal lath, Sewell Avery's big Chicago plasterer automatically reflects any building pickup. Gypsum made $2,888,000 in the first nine months of 1935, against $1,777,000 in the corresponding 1934 period. Gypsum was one of the few building equipment companies to make profits, pay dividends throughout Depression years.

Johns-Manville made $1,573,000 for the first nine months of 1935, against $586,000 in 1934. Sales rose from $18,485,000 to $23,614,000.

American Radiator & Standard Sanitary does not make interim statements. Unofficial reports said that first-half sales in 1935 were 50% ahead of 1934. Biggest gains were coming in "sanitary ware" (bathtubs, sinks, toilets) on which volume was up 60%, prices from 10% to 15%.

Certainteed Products Corp. (asphalt roofing & shingles) last year lost $851,000 in its seventh consecutive annual deficit. In the first nine months of 1935, it squeezed out a $37,000 profit, gave promise of first full-year earnings since 1927.

Sherwin-Williams (largest in paint) made $4,814,000 for the year ending Aug. 31, 1935, compared to $4,269,000 in 1934. Paint companies profit by repairs as well as new building. In September, sales of paint, varnish and lacquers (all companies ) were 31% ahead of September 1934.

Celotex Corp. (insulating wallboard) is successor to Celotex Co.. which went into a 77B reorganization in February 1935 after four years of Depression deficits. Last week the new company reported sales (year ending Oct. 31) of $5,633,000 against $3,914,000 in the 1934 fiscal year. The report claimed "substantial"' (unspecified) profits.

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