Business: Housing Troubles?

"When they couldn't sell cars, housing sold pretty well. And when they couldn't sell housing, auto sales were good. Now things have changed." Thus Detroit FHA Director Dwight Hamborsky last week gloomily described what is happening to housing—when both autos and houses are selling poorly. The change was sketched more precisely by Dr. George Cline Smith, vice president and chief economist of the F. W. Dodge Corp., addressing the Joint Economic Committee. "During the postwar years," said Smith, "housing has tended to behave in a contra-cyclical manner. That is, it has done well in recession, and has often fallen off in times of boom. There is some evidence that the situation is changing."

Unlike 1958, when a burst of housing starts led the economy up from the recession, housing last year led the way into 1960's recession, the first major U.S. industry to turn down. More alarming to builders, who are accustomed to a recession pickup as cheaper mortgage money becomes available to home buyers, housing has stayed down. Nevertheless, the Federal Home Loan Bank Board last week announced a five-point program to make more housing credit available at lower interest rates, reduce downpayments.

Needed: More Buyers. In Dallas, housing starts were down 10% last month over January a year ago. Chicago home sales rose 38% in January over the same month last year, but actual housing starts were down 7%. Says Scott Hudgens, Atlanta's biggest builder: "It looks like it will be fall before housing picks up."

Housing Economist Smith's own estimate for 1961: a modest rise of 5% from last year's low totals, with some 1,300,000 new houses built. Housing now seems to be in step with the ups and downs of the rest of the economy, says Smith, because "the huge backlog of unsatisfied housing demand, resulting from 16 years of underbuilding during the Depression and World War II," has been largely satisfied. Builders are facing a buyer's market.

Needed: Cheaper Houses. Some builders argue that the only backlog that has been met is at the upper end of the price scale. Not nearly enough effort has been made, they say, to provide good new housing for others. High land costs as well as soaring material costs work against cheaper housing, but some builders are trying it. Atlanta's Hudgens, who built only $20,000-up houses until this year, is now building $10,000-$13,500 houses. Another expanding new market: housing for old people (TIME. Dec. 26).

But if the bloom is off the postwar housing boom, most builders see no cause for panic. "The demand will be steady, like food," says one builder. Population growth and simple replacement needs indicate a demand for at least 1,300,000 new homes a year until 1965.