Milford chronicle., 1955-04-08
Philadelphia Federal Reserve Bank
Reports On Current Trends

With the first quarter Of 1856
now a matter Of record, there
is increasing evidence that re-
cOvery is proceeding pretty much
as observers forecast around the
turn Of the year Most Of those
projections pointed to gradual
gains spreading over much Of 1866.
Few Of them anticipated the recent
rapid expansion in basic steel and
automobiles.
Current trends in these indus
tries doubtless reflect among other
things some hedging against the
possibility Of labor-management
disputes IN the late spring and
early summer. In any event, most
observers seem to feel that both
the steel and automotiVe industries
viii have made their major con-
tributions to economic recovery be-
fore the first half has ended. Should
that prove to be the case, more de-
pendence would be thrown on other
lines TO maintain the pace after
mid-year.
The construction industry
lent so much support to the econ
omy while recessiOnaFy forces were
affecting many other lines-is con-
tinuing at a peak level. And among
the major categOries Of cOnstruc-
tion. residential building seems to
be one Of the most buoyant The
extent 20 which home building can
be counted on this year, however,
depends in a large measure on the
availability Of funds for home fl
nancing.
We have made a spot check Of
the mortgage situation and the
plans Of home builders in the Third
Federal Reserve District. The con-
clusiOns that may be drawn from
these interviews are summarized in
the following paragraphs.
Mortgage Investment
Plans Remain Substantial
Lending institutions in this area
expect to invest at least as much
in home mortgages during 1856
as they did in 1854. Some life in
surance companies already are
heavily committed; others will be
active participants shortly. Mutual
savings institutions, commercial
banks, and savings and loan asso-
Citations plan TO originate and pur-
chase a substantial volume Of mort
cages this year. Most of them have
been quite active in this field for
some months. The opinion has
been expressed widely that an ade-
quate supply Of funds for home
financing win continue to be avail
able on reasonable terms. Never
theless, there are some who look
for progressive Tightening in
mortgage markets after mid-year,
particularly If the rate Of housing
starts should exceed that Of 1854.
Secondary Mortgage
Markets Are Active
Considerable strength on an
overall basis prevails in the sec
Ondary mortgage market. The vol
ume of transactions has not chang
ed appreciably in recent months
but there is considerably more ac-
tiVity than at this time last year.
A development Of some signifi-
canoe, however may be the fact
that lenders are expressing decid-
ed preferences for certain types OF
mortgages. COnVentionals and
FHA's are especially favored, and
some brokers have told us there is
not enough Of such paper to salts
~ the demand in this, area.
VA 41a per cent mortgages with
a down payment Of 5 per cent or
more are moving in fairly substan-
tial volume, but they are in plen-
tiful supply in the Philadelphia
market. This situation could
change quickly to one of over-sup-
ply. Demand for the VA nO-dOWn-
payment, 30-year mortgages ap-
pears to have slackened consider
ably in recent weeks. Trading in
the secondary market IS on q par
basis for conyeHtiOnals and FHA's,
But discounts Of from one to three
points are appearing with some
regularity on VA mortgages in
which there is no equity. This is
particularly true in the case Of
the lOng-term loans.
Lending Terms Have
Eased Somewhat
The Housing Act Of 1864 reduced