Help for Housing

The Administration has long worried about the dip in housing construction, now at the rate of 1,100,000 starts a year v. 1,300,000 a year ago. Last week it took four steps to turn the building curve upward again:

P: FHA reduced mortgage down payments by 2% (from 7%) on $9,000-and-under houses, cutting the maximum down payment by $180.

P: Sellers of FHA-VA mortgages to the Federal National Mortgage Association will be required to put only 1% (instead of 2%) of the value of the mortgages in FNMA stock, thus getting more of the mortgage's actual cash proceeds.

P: FNMA will charge 2% less (down from 8%) for buying up advance mortgage commitments.

P: The Federal Home Loan Bank will lend member banks up to 12 1/2% (instead of the previous 10%) of their stock holdings in the bank.

Housing Boss Albert M. Cole predicted that the changes would be reflected in increased housing starts by year's end. But bankers and builders were not so sure. The real trouble is a drastic shortage of mortgage money because of the limit of 4 1/2% interest on Government-backed mortgages v. up to 6% on conventional mortgage loans. Said San Francisco Builder Carl Gellert: "Congress next year should raise interest rates on VA mortgages, making them flexible so they can respond to the tight-money market. Money is like any other commodity. If you make the terms attractive, you're going to bring more money into the market. At this time 4 1/2% simply isn't attractive to a lender." Chicago builders doubted the program would affect housing around metropolitan areas, where the $9,000 house is not a big factor. Most other builders would only concede that the changes were "a step in the right direction."

Although housing starts will probably remain below last year's rate, the economy was still in high gear: retail sales, were up 4% for the week, steel pushed at 99.6% of its capacity, corporate dividends were up 15% for the first eight months, employment was at an alltime high of 67 million. And one index was pleasantly down: consumer prices dipped .02% last month, breaking a five-month climb. The news was tempered with a sobering thought that expected price increases for meat, apparel, coal, haircuts and automobiles (see below) may raise September's cost of living to last July's alltime high of 117%.

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