Evening star. [volume] (Washington, D.C.) 1854-1972, 1935-10-19
BUILDING COST
. REDUCTION URGED
Building Loan Association
Head Cites Plan to Stimu-
late Construction.

Need for some dollar and-cents an
alysis of proposed stimuli to home con-
struction is emphasized by I. Fried
lander, Houston, president of the
United States Building and Loan
League, in a statement currently is
sued to 1900 member savings, building
and loan associations.
Mr.. Friedlander compares the rela-
tive influences of a reduction OF in
terest rate from to per cent on
home mortgage money and OF re-
duction in like degree of the cost Of
construction. He finds that there Is
three times as much of a decrease in
the cost to the borrower by the ap-
proach from building cost angles as
there is in the mortgage cost approach.
1T seems decidedly important that
all national leaders interested in bring
ing about home building in 1886 at
levels high enough to absorb millions
of unemployed should face the fact
that the amount of the monthly pay
ment on the home is the real deter
minant as to whether or not family
undertakes to build home or to buy
a newly built one" said Mr.. Fried
lander. 1--WE can trace through to
their effects on the monthly payment
the two alternative ideas of reducing
building costs and of reducing inter-
est rates and find which is the most
powerful incentive to expanded con-
struction.
Taking per cent as the normal
mortgage lending rate in the COM
'munity of our typical example, let us
consider the effect of reducing the rate
to 5 per cent. This actually means
a 1923 per cent reduction in the cost
of mortgage money.
"A family about to acquire home
at the total cost of $4,000, with the
, land costing ST 900 and the new build
, ing $4,000, may require for purposes
. of this example mortgage loan OF
. 70 per cent. of the total value, l. e.,
, $4,000, since down payment OF $l,80O
. is possible A. savings, building and
. loan association or any other mortgage
. lender willing to grant 10 per cent
loan with IS years to pay 1t out would
REQUIRE a monthly payment OF $35.45
at 6 per cent. and monthly payment
Of S33 % a month at S per cent. In
other words, reduction of the cost OF
the mortgage money by 1923 per cent
reduces the shelter bill of the family
only 1923 month.
Approaching the problem from the
> cost -of construction angle, 1853
: per cent decrease in the cost OF build
ing would place it at S4,l67 and the
total cost of the house and lot at
, s5.167. At this new low figure and
, with the same down payment which
, this typical home builder could offer
, in our other example he would have
, to borrow only S3,367. Monthly pay
. ments required to amortize this loan
! in IS years at 6 per cent interest would
be S28.42, or a benefit of S7.03 in COM
parison with the old price, stable
incentive to the families undertaking
home construction.
practically every one comedies that
the $4,000 house and even the less
costly dwelling than that constitute
the field in which we should see the
re idential building revival gain head
way. In order to reduce the monthly
payment on a $4,000 house by ST
through the Underestimate method,
mortgage money would have to be
discussed at 2l2 per cent on 15-year
basis. Mortgage money at 212 per
cent, to pay savers return on their
capital as well as to cover the expenses
of management and serWcing of loans,
is not even to be considered seriously
by people experienced in this field