Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-03-16
BUILDING RECOVERY
HELD SURE METHOD
TO RESTORE TRADE
Col. Ayres Points to Home
Construction as Means of
Promoting Prosperity.
CREDIT EASE HAS FAILED
TO INCREASE CONTRACTS
Securities Markets Show First Re-
spouse to Rapid Drop in In
terest Rates.
sneci.1 pisnntch to The Star.

CLEVELAND, Ohio, March 15.-The
hope for improvement in business rests
on the fact that credit has become
cheap and is becoming plentiful. If
cheap and abundant credit could ef-
feet a recovery in building, and espe-
cially in residence construction the
prompt return of prosperity would be
made sure, says the monthly Business
Bulletin of the Cleveland Trust Co.,
edited by Col Leonard P. AyreS. Build
ing booms destroy depressions. So far
this year the progressive easing of credit
conditions has had stimulating effect
on security prices but it has not sue
ceeded in checking the long decline in
residence building. The reason for this
does not seem far to seek.
During several years past the Ameri-
can people have used truly enormous
sums of our national savings for two
sorts of investments, the purchase of
homes and the purchase of securities.
1t was a period of prosperity in two
phases. First every city had its real
estate boom, and then every exchange
had its stock market boom. The two
kinds of boomS overlapped and inter-
mingled. Finally both booms flattened
out, the real estate boom going down
first. Probably 1t Is true that the Ma
tion-wide shrinkage Of values from the
top figures to the present ones has
been greater on the real estate than
it has been on the securities.
Realty and Securities Loans.
While the two sets of booms were
going forward great amounts of credit
we're being extended in. the form of
loans to help purchase real estate, and
loans to help buy securities. Now that
both booms have come to an end there
Is ample opportunity to compare the
results Of lending on real estate with
those Of lending on securities, and the
comparison is painfully to the diSad-
vantage Of real estate loans. Fore
closures and tax sales are everywhere
numerous. Many building and loan
companies have suspended. Almost
every bank has taken losses on its real
estate loans, and is still taking them.
Lenders on securities suffered no such
losses. Call loans in Wall Street proved
TO be entirely safe. Few banks are wor-
ried about their collateral loan accounts.
The result Is that abundant credit sup
plies do not now make second mortgage
loans available to the prospective home
builder, but they do stimulate the stock
market. In time they will create q de-
creased municipal and corporate build
AAS oSEAfA1Jb 1o1 VAC PAOOCco 10 q oAoH
one.
1t is probably true the the most i'm
portant single element in the present
business depression is the low level of
residence construction. One reason for
the lack of activity in the building of
new houses and apartments is the scar
city Of funds for junior financing, usu-
ally in the form of second mortgage
loans available to the prospective home
still more important fact that second
mortgage credit Is hard to obtain be-
tended such loans during the past sew
eral years have had bad experiences
with them.
Recent Over Building.
The clear fact Is that there has been
a good deal OF over-building in Ameri-
can cities in recent years, and the evil
dence of this is found in the marked
and widespread increase in real estate
foreclosures and tax sales. These forced
sales constitute the real explanation of
the virtual disappearance of new second
mortgage loans. The scarcity of such
junior credit for building u in reality
result Of former over-building, and In
only secondary degree a cause of pres
ent under-b building. This situation will
be helped by general easing of inter-
est rates, but probably the improve
ments resulting from that influence will
come somewhat slowly.
The most important development in
the iron and steel industry is the waning
vigor of its activity. When corrected
for seasonal changes, steel activity has
receded some per cent in as many
weeks. Pig iron production, more slug
gish than steel In its response TO d.
minishiAg demand, advanced in Feb
hat ut
The vigorous recovery Of steel activ-
ity in the early weeks of this year gen.
Grated, perhaps, too much confidence.
The hating of that recovery may in
turn create too much encouragement
It is probably true that the most i'm
estimate as to the probable production
Of automobiles during the months d.
rectly ahead, but the indications are
that increases will come somewhat
slowly. One of the evidences of this is
found in the figures published by the
Department Of Commerce showing the
changes in the orders received by
makers Of malleable castings. Large
tonnages of these castings are used by
manufacturers Of automobiles, and or
derS for them must be increased or dt-
minished we'll ahead Of changes in the
production schedules of the makers of
motor cars. For this reason the data
for orders Of castings constitute rela-
lively reliable indicators to foretell COM
ing changes in the volume Of automo-
bile output month or two ahead.
Low March Output Seen.
The noteworthy fact about the pres
ent situation is that there was no in
crease in the castings figures in Janu-
ary-in fact, there was a slight de-
crease.
The conclusion which must be drawn
from all this has already been con-
nrmed by the preliminary figures show
ing that the increase in automobile
production was distinctly moderate In
FEBRUARY, and 1t seems probable that
the March output will be relatively low.