product should be allocated to housing. This can only be accomplished if this Nation consciously decides to do so. This entails a continuous recognition by the Congress of the need to follow through on its commitments of 1968 as well as a complete willingness on the part of the administration to use fully imaginatively the authorities given it by the Congress. No one action by Congress, by the administration or by the Federal Reserve Board, or by private industry, can or will solve the present housing crisis or meet the future housing needs of the country. Broad, correlated actions by all are necessary with respect to every facet of mortgage credit and housing production. Central to all of this, however, is the necessity to modernize and restructure our financial policies and institutions. Accordingly, we commend the committee for these hearings and we appreciate this opportunity to appear. Thank you. STATEMENT BY PRESIDENT NIXON ON THE HOUSING CRISIS AND THE ECONOMY, JANUARY 21, 1970 Yesterday I met with Secretary Romney, Louis Barba, and officials of the National Association of Home Builders to discuss the crisis situation we are facing in the housing of our people. The continuing decline in housing production, the outflow of funds from savings institutions supporting the housing market, and the drying up of traditional mortgage sources are contributing to a serious housing shortage which is of grave concern to our national well-being. Housing and the industry which provides it are bearing a disproportionate burden of both current inflationary pressures and the anti-inflation measures instituted to restore price stability. As a result, a major national resource-the productive capability of our private home building industry to meet our national housing needs-is being greatly threatened. The decline in housing production must and will be stopped. The private sector and all levels of government must take the steps necessary to assure that the Nation's housing needs are more fully met now. There are no easy answers to the housing problem, and a full solution will require time. Extraordinary and unprecedented steps have already been taken. These include extensive direct support to the mortgage market through the Federal National Mortgage Association and the Federal Home Loan Bank Board. In addition, the Department of Housing and Urban Development has authorized issuance of mortgage-backed securities fully guaranteed by the Government and has released $1,150 million of funds to provide special assistance in the financing of housing production for low- and moderate-income families. The need now is to go beyond these steps-to change basic attitudes and reexamine old patterns of activity-so that we can reach more quickly the full solution we seek. The first step is for all sectors of our economy-business, labor, consumers, and all levels of government-to be fully aware of the nature of this crisis, and for each of them to address itself vigorously within its sphere of responsibility toward adequate solutions. The need to regain early control over inflation is paramount, and voluntary steps to restrain unnecessary spending can play a vital role. In this connection, I have firmly committed the Federal Government to do its part. In order to maintain a surplus in the budget, I have cut Federal spending to the minimum possible levels this year and next. Some needed Federal programs simply will have to be postponed, so that we live within our means. This will help free resources for housing. I urge the private sector to follow this example by also postponing avoidable expenditures and increasing savings. Sometime ago I cautioned business and labor against continuing to base price and wage decisions on the expectation or continued inflation. Those who do are bound to lose. The sooner this is realized the better off they-and the Nation as a whole-will be. Lack of mortgage money is perhaps one of the most pressing immediate restraints on housing. Needed housing must and will be financed and built. All financial institutions-commercial banks, mutual savings banks, savings and loan associations, life insurance companies, pension fund, and trust funds— should recognize the investment opportunities that will exist in this field over the years ahead. They should seek now to move affirmatively into a better position to capitalize on these opportunities. I pledge that this administration will take every possible step to solve this most serious housing problem consistent with the overriding need to contain inflation. The housing of our people is and must be a top national priority. ECONOMIC NEWS NOTES HOUSING STARTS XVI VOLUME February 17, 1970 NATIONAL ASSOCIATION OF HOME BUILDERS / 1625 L STREET, N.W., WASHINGTON, D.C. 20036 MICHAEL SUMICHRAST, Chief Economist / DONALD SPEAR, Assistant Director / SARA FRANKEL, Research Analyst The seasonally adjusted annual rate of ANNUAL RATE IN JANUARY DOWN 6.9% housing starts in January decreased 6.9% from 1,252,000 units in December, and 37.9% from the high reached January, 1969 of 1,878,000 units to 1,166,000 units. Both singles and multiples showed declines, singles down 3.3% from 719,000 units in December to 695,000 units in January, and multiples down 11.6% from 533,000 units to 471,000 units. Regionally, gains were registered in the Northeast, up 20.4% from 142,000 units to 171,000 units and in the North Central, up 23% from 256,000 units to 315,000 units. The South declined 17.8% from 568,000 units to 467,000 units, and the West dropped by 25.5% to 213,000 units from 286,000 units. ACTUAL STARTS FOR 1969 DOWN 3.3% Revised total public and private starts for 1969 were at 1,497,000 units or 3.3% below the 1968 total of 1,547,000 units. Total private starts were 1,462,700, 3.0% below the 1968 total of 1,507,700 units. For the year, singles declined 8.9% from 889,500 units in 1968 to 810,100 in 1969 and multiples gained 7.5% from 608,200 units to 653,600 units in 1969. PERMITS DROP 23.4% IN JANUARY . . . The January seasonally adjusted annual rate of building permits was at 952,000 units, 23.4% below the December rate of 1,239,000 units. Singles were down 28.5% from 639,000 units in December to 457,000 units in January. Multiples were down 17.5% from 600,000 units to 495,000 units. Regionally, all four regions registered declines: Northeast down 15.9%, North Central down 49.1%, South down 10.5%, and West down 17.0%. January building permits are at the lowest level in three years and second lowest in the 11 years for which monthly data is available. The January decline is the sharpest monthly decline in recent history. IN SUMMARY The January starts behaved in just about the way we had predicted that they would. The unprecedented sharp drop in building permits furthermore, supports our September forecast that the seasonally adjusted annual rate will indeed get close to the one million unit level. Based on January starts, the 1970 housing starts forecast suggests a further decline in housing starts from the forecast made on month ago. 1 FHA annual totals including all units; monthly rate includes 1-4 family. 2 Based on 12,000 reporting places 1962-1966 for permits, and 1962 - March, 1968 for starts. Source: Department of Commerce, FHA, VA February, 1970 1959 1961 1962 1963 1964 1965 1966 1967 1960 1968 1969 1970 Through December 1962, 10,000 reporting places, from 1962 through 1966 based on 12,000 reporting places, from January 1967 based on 13,000 reporting places. SOURCE: Bureau of the Census. 2.0 1.5 1.0 1959 1963 1964 1969 1970 Through December 1962, 10,000 reporting places, from 1962 through 1966 based on 12,000 reporting places, from January 1967 based on 13,000 reporting places. SOURCES: Bureau of the Census, FHA and VA. NAHB-Economics Department Mr. BARRETT. Mr. Rice. STATEMENT OF JAMES V. RICE, CHAIRMAN, MORTGAGE FINANCE COMMITTEE, HOME MANUFACTURERS ASSOCIATION; ACCOMPANIED BY DON GILCHRIST, EXECUTIVE VICE PRESIDENT, HOME MANUFACTURERS ASSOCIATION Mr. RICE. Thank you, Mr. Chairman, distinguished members of the committee, ladies and gentlemen. My name is James V. Rice, and I am vice president, mortgage finance, Pease Co., Hamilton, Ohio. I am delighted to testify before you on behalf of the members of the Home Manufacturers Association and their building product manufacturer associates in the industrialized production sector of the housing industry. The Pease Co. is in the business of manufacturing and marketing building products and structural components for houses and multifamily buildings. On my right is Mr. Don Gilchrist, who is the executive vice president of the association. My testimony is focused on three issues: 1. In the sense of simple, honest, traditional American fairplay, is it right or wrong for one sector of our economy, the housing industry, to be denied equitable access to credit, its very lifeblood, as monetary and fiscal policies are invoked in the name of actions to achieve national goals? 2. Is homeownership, and does homeownership continue to be, a desirable characteristic in our national life, and should a variety of dwellings continue to be made available for those who choose to rent, so that individual tastes may be served? 3. Accepting the premise that an expanding housing industry is a necessity, from what sources will credit come, hopefully in some stabilized flow, to support it? Back to issue No. 1. My testimony, stated simply, is that interrelated operations among the Federal Reserve System, the U.S. Treasury, and other Federal financial agencies, particularly the Federal Home Loan Bank System, have had unnecessarily harsh effects through violent fluctuations in interest rates and in interruptions of money flows on the housing sector for our economy. This kind of performance signals the need for, and I recommned establishment of a high-level commission to study these interrelationships, and to recommend and help bring about whatever changes are required to correct the obvious imbalances. În speaking to issue No. 2 on homeownership and rental choice, my recommendations are to channel more responsibility for needed housing production back through the system of housing construction, locally established around member institutions of the Federal Home Loan Bank System. In considering issue No. 2, "Where is the money coming from? "My support is for measures that accomplish the following: 1. Encourage and induce savings in institutions committed to finance home purchase and multifamily ownership. 2. Provide relief for thrift institutions "locked in" with low-yield portfolios. |