That is all, Mr. Chairman. Mr. MULTER. Just a few questions please. Mr. King, are you interested in keeping the prices down? Mr. MULTER. The more materials you sell the better off your industry will be? Mr. KING. That is correct, provided Mr. MULTER. Do you think that cooperative housing will make more demands on your industry for lumber? Mr. KING. That is the point I made in the early part of my testimony. If we were to rely principally on income derived from poorly conceived financing, we would be very shortsighted, both from the standpoint of the building supply dealer and from the standpoint of the people, in general. Mr. MULTER. Do you think that lower-cost housing if made possible by cooperatives will hurt your industry while 608 housing would help your industry? Mr. KING. I think you are drawing an assumption from my statement that is not correct. We do not think that the cooperative housing, as such, will produce any lower-priced housing. Mr. MULTER. Wouldn't it create a greater demand in your industry for more material? Mr. KING. Any method of increasing the availability of money to buy housing or any other commodity will produce a greater temporary demand; yes. Mr. MULTER. Your industry does not want that additional demand? Mr. KING. No; not at this time. Mr. MULTER. You would rather ship that lumber abroad than sell it here? Mr. KING. We can sell most of it here. Mr. MULTER. What is the situation in your industry now? Mr. KING. In building materials, the production of building materials is running just about level with demand. Mr. MULTER. So if there is any greater demand for your materials that your industry supplies the prices are going to stiffen and probably go up? Mr. KING. That is correct. Mr. MULTER. Why is your industry urging that ECA take more Government materials for export? Mr. KING. Why is our industry recommending that? Mr. MULTER. Yes. Mr. KING. You are not speaking of the retail lumber industry. We have never recommended that. Mr. MULTER. You are not interested in shipping lumber abroad? Mr. KING. We are certainly not.. Mr. MULTER. What do you mean by this: "If the present costs are high, the fault lies with Congress and not the industry"? What do you think Congres should do to lower your costs? Mr. KING. We have never advocated financing to the point where it creates an economic demand over and above the supply of materials and labor. Mr. MULTER. This is your statement: "The fault lies with Congress. What do you think Congress should have done or should not have done that it is doing that makes the cost high? Mr. KING. Liberalizing financing to the point that it has. Mr. MULTER. Then, we ought to stop all the 608 and 207 financing? Mr. KING. Six hundred eight financing, in our opinion, was too liberal. 207 has never been liberal. It is too tight. Mr. MULTER. How about the VA financing? Mr. KING. The VA financing has not been too bad or too liberal. We feel though that veterans have been encouraged to buy houses more rapidly than they should have. Mr. MULTER. So you think it would be a good thing if we stopped VA and 608 financing? Mr. KING. No, if you are taking too much medicine, you don't have to stop taking the medicine, do you? You can cut it down. Mr. MULTER. Do you want us to stop any of the financing? Mr. KING. We don't want you to stop it. We want to produce the number of homes that labor and material can build without creating an inflationary spiral. That has been our position consistently. Mr. DEANE. What do you think has been the average profit to the promoter of FHA 608? Mr. KING. I would have no idea. Mr. DEANE. You said that you thought it was too much. Mr. KING. I did not say the profit on 608's were too much. I said the cost all along the line has been inflated by too liberal financing. Mr. DEANE. You do not have any idea of the profit? Mr. KING. NO. We know this: That the money market has been so free in housing that it has created a scarcity in labor and for a time it created a scarcity in building materials. The building-materials situation for almost a year or 18 months has been equal to the demand. The labor market is still tight. Mr. MULTER. There is just one other thing I would like to touch on, Mr. King. You said, "If the Federal Government is to avoid contingent liability under this program it will be necessary to invade the privacy of the home." Then you go on to say that it would be necessary for the Government directly or through the management of cooperatives to oversee the modernization, maintenance, and repair of the buildings. Mr. KING. Correct. Mr. MULTER. Do you know of a single mortgage that has been placed anywhere in this country in the last 40 years that does not have a provision in it requiring the owner of the property to keep his property in good repair, on default of which the mortgage may be called? Mr. KING. I think you are correct on that. Mr. MULTER. So we have that policing right now by every mortgagee who has a mortgage. Mr. KING. You don't have any actual application of that policing. Mr. MULTER. We don't? Mr. KING. No. Mr. MULTER. You do not know of any mortgagees that go to an owner of property and say we are going to call your mortgage or require you to pay off a large part of the principal if you do noti modernize it or keep it up to date? Mr. KING. You may have in very isolated cases, yes. The reason you don't have an actual application of that today is because the amor tization period is short, 20 years, but if you provide an interest_rate this low and an amortization period of 50 years, you are going to have actual policing because you have no equity in the property. Mr. MULTER. So you say that the lending institutions, the banks and insurance companies, and are sitting back doing nothing about watching the maintenance and repair of the property because they have agreed to wait 20 years for their money, but if they have to wait 30 or 40 years they will be more active in the policing of the buildings? Mr. KING. I certainly would if I were a lender, wouldn't you? Mr. MULTER. No; I think the fact happens to be that they watch these things pretty closely now and make sure that there is no deterioration of their investment or the property which is the guarantee of its repayment. Mr. KING. Of course, I have been a home owner only a short period of time and it has a substantial mortgage on it. I have never seen anybody from a financial institution ever visit me nor have I ever heard of anybody who had their home visited by a financial institution. Mr. MULTER. I would not want to have my money in the company that holds that mortgage. Mr. KING. It just does not occur. In certain instances, yes, but isolated. Mr. MCKINNON. Do you have any figures to show the increase of your repair and maintenance costs as the house grows older? In other words, maintenance cost, I guess, of the house the first year or two or three or four that it is built is very small. Do you know what the maintenance cost of the house after it gets to be 30 years old may be or 40 years or 50 years, what it figures out to be? Mr. KING. I do not have any figures on that, Mr. McKinnon, but I can say this: If the house is maintained year in and year out, there is no reason for the cost to increase over a period even beyond a 30-, 40-, or 50-year period. They would be about equal except for the first 5 to 10 years. After that they should equalize themselves out as long as the house may last, 50, 60, or 100 years. Mr. MCKINNON. You do not have any rule-of-thumb formula as to what the percentage on the house is? Mr. KING. Financial institutions have issued some. them for you. I could get Mr. MCKINNON. I would like to have you supply those if you will. Mr. WOLCOTT. Along that line of Mr. McKinnon's question, I think when we had the accelerated depreciation title of the several bills up, we found that for all practical purposes the life of a house was 40 years. The depreciation was spread over a 40-year period and my memory was also that that was used for tax depreciation purposes. The presumption was that you would pay off the depreciation in the first 40 years. Mr. HAYS. Mr. Talle? Mr. TALLE. Thank you; no. Mr. HAYS. Mr. Mitchell? Mr. MITCHELL. Just one or two questions. I take it from your statement that you would contend that the supply and demand for building materials was in balance during 1949 when you had a production of about 1,000,000 units. Mr. KING. It would probably run closer to 1,200,000, counting the farm housing. Mr. MITCHELL. Then I wonder why the mills and the producers of lumber were saying that they had an oversupply because they were losing foreign trade. They were not getting ECA orders and, therefore, had to close down in the woods and in the mill. Mr. KING. During the first 6 months of this year, construction did fall off. It picked up during the last 6 months and absorbed most of that surplus production. Mr. MITCHELL. But they were still very worried about the failure to get additional foreign orders. Their statements to me do not jibe with your statement to the committee. I just want to find out the reason for the difference between your attitude and their's. Mr. KING. There are some items that have traditionally never been used by this country in production or construction. Mr. MITCHELL. That would indicate that there is still a considerable additional supply to be drawn on for additional housing in this country. Mr. KING. That is correct, except some of the items are not adaptable to home construction. Mr. MITCHELL. I mean it is just a matter of different cutting? Mr. KING. Well, in your southern yellow pine, you have what you call your long leaf, stress grades, that have never been used in construction of homes. They are what you call stress grades of lumber and there has always been an export market in those stress grades. Mr. MITCHELL. But you would say there is an additional supply which could be called upon for additional construction of homes in this country? Mr. KING. Right now they are just about in balance on lumber. As you know, your west coast shipments are now exceeding your production. Mr. MITCHELL. What do you mean by "right now?" This is the production time for the west coast. Mr. KING. You had two factors. You had the normal downward production that you would expect this time of the year. Let us go back 3 months because you had good weather on the west coast. Your production was up, seasonally. Mr. MITCHELL. It was up because of the demand in the housing industry during the later part of 1949. Mr. KING. It was up also because of weather conditions. They were unusually favorable to production in the last 3 months. Right now the weather conditions are bad. Mr. MITCHELL. But right now you have the usual seasonal decline. Mr. KING. Partially because of seasonal decline and partially because of the high volume of construction which is unseasonable. Mr. MITCHELL. Thank you. That is all. Mr. HAYS. Discussion off the record. (Discussion off the record.) Mr. HAYS. On the record. Thank you, Mr. King. The committee will adjourn until Tuesday at 10 a. m. (Whereupon, at 1:10 p. m., the committee adjourned, to reconvene at 10 a. m., Tuesday, February 14, 1950.) |