Evening star., 1938-04-09
TIME HELD RIPE
TO BUILD HOMES
Researcher Concludes That
Cost UpsWing May Soar
for 1889.

for 1899.
Now is the time to build homes, for
construction costs are rising and may
reach high levels by 1889. Moreover,
savings and loan associations should
be liberal in financing small, compact
dwellings. even in suburbs.
This. in brief, is the advice given by
Prof. John H. Cover, professor Of busi-
ness statistics at the University of
Chicago, after a detailed study of
wages, construction. real estate activi-
ties and mortgage foreclosures in the
seventh Federal Home Loan Bank dis
trist. comprising Illinois and Wiscon-
sin. His findings are summarized in
the April issue of the Federal Home
Loan Bank Review.
Income, the survey revealed, is the
dominant factor in the demand for
housing. AS the wage curve rises, so
does construction, and as it falls va
cancies increase and building falls off
sharply. This was shown positively by
study of wages and real estate condi-
tions in seven important industrial
towns of Illinois and Wisconsin.
Three Eras Shown.
Extremely violent fluctuations in
building in the Chicago area since pre-
war days were shown by the analysis.
This period was divided into three
eras-the normal years, 1890; the
frenzied decade, 1929, and the FAM
Inc years, 193036.
THE nature of the building cycle
In Chicago" the report said, "can be
Indicated by four significant observa-
tons
"First. the amplitude and violence
Of the changes in the construction
cycle was notable. The total average
building permit values in the second
period were over three times as great
as in the first period of normal years
and over IL times as great as in the
famine years.
Second, the value of residential
building permits dropped from an an
nual average of S190,00O,0OO in the
period 1s26-29 to an average of s6,-
100000 in the famine years'-a
shrinkage of almost 81 per cent.
Income Factor illustrated.
Third, as the income of the wage
earners fell during this depression,
construction also dropped, but to
far greater extent, until residential
construction almost disappeared in
1928. In 1888 permits were issued
for only S546,000 worth of residential
building, exclusive of additions, altera-
tlons and repairs in Chicago, in con-
trast to a total of over S242, 100000
IN 1926.
Fourth, there has been only the
slightest revival of the construction
industry in Chicago in l934-1936. No
type OF building, up to the end of 1896,
made any appreciate approach to the
normal volume of 1913-l920, with total
construction in 1886 being only one
NTH OF the average for those years.
The practical disappearance of con-
structlon was true both of one-family
and OF all residential units"
The rent level, Prof Cover discov-
cred, has more influence on construc-
ton than has building cost. A high
rate OF occupancy, he found, keeps
step with high employment. In the
chicago area, for instance. it was re-
Vealed that in October and November,
1881. when the wage level stood at 100
the index of occupancy was "a. but
when, in December, 1882, and Janu-
sry' 1888, the wage level slipped to IS,
occupancy declined to rs.
Boom Began in 1921.
Many home financing institutions.
the report said, will regard as highly
significant the fact that the boom of
the frenzied decade in Chicago began
in 1921 when there was 100 per cent
occupancy"
Occupancy began to decline as earlv
as 1928, 1t was shown. and by the end
OF 1926 had assumed a well-defined
trend. Also, foreclosures began to rise
IN 1926. Nevertheless. building in Chi
cago continued in 1927 and 1928 al
most on par with the peak year of
1926.
Inc slogan was: Everybody is
building; so why shouldn't we?" In
this connection Prof Cover advised
builders and loan associations to
analyze the trends and discount popu-
lar activities.
Two OF his outstanding suggestions
Tor the present moment we're:
l. Encourage the construction Of
dwellings and emphasize mortgage
loans for construction at once since
production costs are advancing rapidly
and may reach very high levels by
1889. ~
2 Be relatively more liberal in
the small, compact dwelling
even In the suburbs.