Housing: Rising

The Kennedy Administration's economists made some extravagantly incorrect predictions about the course of the U.S. economy for 1962, but they were right on the nose with their forecasts for housing. A year ago, the Administration predicted that urban starts of new houses and apartment units would rise about 9% during 1962, to a total of some 1,400,000. Last week's report from the Commerce Department strongly indicates that the final total will hit that mark.

Builders are getting their biggest boost from the demand for new apartments. A decade ago, when the great yearning was for a home in the suburbs, apartments accounted for only 10% to 15% of the housing starts; this year they will amount to 30% across the nation, to 50% or so in greater Chicago and Southern California --and to a whopping 80% in New York City. Among the key factors behind this rise: the number of older couples who want easy-to-care-for apartments is increasing, and land prices have shot up so much that apartments are a more efficient use of expensive space.

Even so, the market for homes remains strong, partly because mortgage money is easier. The recent rise in interest rates on savings deposits has created a healthy surplus of. lendable funds in banks and savings-and-loan associations, and last summer's stock market drop made insurance companies and pension funds more interested in investing in safer mortgages. Mortgage-interest rates run as low as 5% in Chicago and 5 1/2% in the fast-building West.

The average price of a new house insured by FHA, which covers nearly 20% of the homebuilding market, has gone up $1,000 this year, to $15,000. Prices have risen slightly for better houses, too, and demand for them is increasing. A solid-quality house with three bedrooms, fully equipped kitchen, two bathrooms and a playroom sells for $16,000 to $22,000 in Atlanta, $18,000 to $23,000 in Kansas City, and $23,000 to $33,000 in Los Angeles.

There are signs now that prices are stabilizing and that an investment in a house is losing some of its value as a hedge against inflation. Seattle Mortgage Banker Herndon McKay thinks that "the point has been reached where the purchaser can expect to sell his home for less than he paid for it"--just like any other item that depreciates with age and use.

For next vear, Government economists predict no fall-off in apartment building, but no sudden spurt in single-home building. It looks to them like another year of 1,400,000 private, nonfarm housing starts, worth $18 billion to the economy.

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