REAL ESTATE: Houses to Live In

Suburban real estate, like everything else in the U.S., is having a spanking fine boom. Demands and prices for homes are at record levels; mortgage loans are being made on appraisals far in excess of the long-term property value. Yet only a minority of observers see a repetition of the record real-estate panic of the early ‘305. This time the boom seemed on much firmer ground.

Gloomiest observer was the Federal Home Loan Bank Administration. Over & over again during the past two years FHLB Commissioner John H. Fahey has warned that every type of financial insti tution has been making “reckless” loans, that the “unsound wartime realty boom” could have but one end: a postwar wave of foreclosures that might make the last depression look like a sideshow.

But the majority of bankers, realtors and neutral observers regarded this hair-raising view as far too extreme, for three reasons :

¶ Loans being made now, even on inflated values and for long terms, are being steadily amortized, thereby increasing the property-holder’s equity.

¶ Since the last panic, second mortgages have virtually disappeared, as poor risks.

Now, instead of running three to five years, and therefore requiring payment in huge sums, mortgages today go up to easy 25-year terms, comparable to rent.

¶ There is no really wild speculation. Instead of buying property sight unseen and finding it later two miles out at sea, the U.S. people have bought homes to live in, or as a hedge against inflation, or both.

Sky-high war wages and a drastic short age of dwellings are responsible for sky-high prices. But the would-be homeowner wants a home for his family, whatever the cost. During the first half of 1944, average prices for all types of real estate were 12½% above the 1943 level, with some industrial areas reporting a wartime rise in private dwellings of 54% and up. For example, one Los Angeles house that sold in 1942 for $7,850 brought $15,500 last winter. In Pittsburgh a man bought a new house for $10,000 last summer, sold it six months later for $11,900.

But the really big real-estate boom has not yet even started. Washington planners are counting on new residential building as a chief item in providing postwar employment. Predictions as to the number of houses that will be built in the first post war year vary from 560,000 to 1,000,000.

And an even bigger project will be repairs, since hardly a house in the U.S. will not need some kind of refurbishing. Thus, while $2,000,000,000 may be spent in the first year for new houses, $3,000,000,000 will go into repairs on existing structures.