Putting On the Brakes

The U.S. Government and private bankers last week gently stepped on the credit brakes to keep 1955's economy from growing too big, too fast. In Washington, the Federal Housing Administration reduced the maximum FHA loan period from 30 to 25 years, also boosted the minimum down payment by 2% to a total 7% on the first $9,000 of value. Though most of its loans were solidly secured (see below), the Veterans Administration also tightened up on the building boom by requiring at least a 2% down payment on previous no-down-payment loans. In Manhattan, major banks also cut down on credit by hiking interest rates on loans to brokers to carry margin accounts. But these actions were not likely -- or indeed intended -- to make a big dent in 1955's prosperous economy.

Despite the credit brakes, a new construction record is already in prospect for 1955. F. W. Dodge's midyear construction review reported a 30% increase in all classes of building contracts to a total of nearly $12 billion during the first six months, with no sign of a letup in sight.

For U.S. consumers, higher prices pushed the cost-of-living index up .2% to 114.4% of the 1947-49 average, the first rise in a year. But there were no signs of a slow-up in buying by well-heeled consumers. (Auto workers got the fattest paychecks ever, an average $103.09 weekly -- $13.28 more than last year -- at General Motors for the first six months.) In a June sampling of 2,000 families, the University of Michigan's Survey Research Center found that 75% thought it was a good time to buy large household items (appliances, furniture, etc.), while more families than last year were in the market for new homes. A full 25% of the families quizzed said that the family breadwinner had won a raise or a better job in the last year.

In a survey of 407,000 homeowners, the Veterans Administration last week reported on what kind of a man takes out a VA-guaranteed home loan. The conclusion: by any standard, he is a solid citizen. According to the VA, the average veteran with a VA loan is 32 years old and has a yearly income of $5,780, with another $2,000 socked away in the bank. He spends an average $11,640 for his house, pays $1,100 down and makes monthly payments of $95.15 for interest and amortization. Of all 407,000 homeowners, 60% bought new homes, 40% older units.

This file is automatically generated by a robot program, so reader's discretion is required.