Inflation, Tight Money Cripple Banks Arkansas TIMiS, Wed., July 17, 1974 -" ARKANSAS _ - Â· 27 Housing Slump Said Worst On Record NEW YORK (AP) -- The nation's bousing and mortgage slump has grown into the worst on record, according to some bankers'and builders. Inflation and : tight money have crippled banks abilities to provide mortgages: Building material costs have skyrocketed and supplies are tight. Bankers in Boston and Seattle say they're out ol mon- . ey for mortgages and a contractor in Annapolis, Md., complained recently Â·', he couldn't find nails for carpentry work. what you might call 'influence peddling.' The bank told me the mortgage market was tight and I told them I'd help them to a certain extent with a savings deposit. I used money and clout," he said. It's an ugly picture for most other home shoppers. The Commerce Department says home building declined 11.1 per cent in May. from the previous month, and 38 per cent from' a year ago. Building permits for the nation declined 43 per cent in May from a year Ntw York, tage and home building margin eight ;ets. Some of that money, to be ""'" * raised on the open markets Â·ather than from the U.S. Treasury, will be channeled With most consumers now argely priced out of the hous- ng mortgage markets, John M. Wetmore, director of economics md research at the Mortgage Banks Association, said many 3anks now extend mortgage credit only to top executives of :ompanies which do business at the bank. "Sure it's discriminatory," he said, bul added, that there seems no other ' way to distribute what little money a bank has to lend in mortgages. One such local VIP, who declined to be quoted' by name, recently bought a ?50,000-plus home in Glenwood, 111., a Chicago suburb. He was a general manager of a local business, and had tried eight lending institutions before one finally gave him a '7.8 per cent mortgage. "I got my mortgage through igo, ' and reached the lowest eve! since April 1967. -Last year, 2.06 milliqti permits were ssued, bul this year, according to Michael Sumichrasl, economist for the National Association of Home Builders, the figure wil be more like 1.45 million . Construction firms must pay anywhere from 2-5 : per cent above the bank prime lending vale, which now stands at about 12 per cent at most banks. Smaller contractors often pay even more. The higher interest rate translates into a bigger price tag on a new home. The cost of the average new home has jumhped near $20,000 since 1970. . Tn an effort to relieve the situation, trie Nixon . administration last Mav committed up lo $10.3 billion in credit to bolster the nation's sagging mort- sotne places .virt cut. 'Through Ma savings and loa granted $18.18 bi home buyers, do 20.4 per cent 1 parable period IE MORE Interest rates mortgages for previously occup ily houses in 8.84 L per cent, a Federal Home Board. The board sait homes compare May and 7.79 ps 1973. For prev houses, the ear 8.6? and 7.79 pe But the range from state to s on local usury 1 prevent lenders excessive intcre nto the hard-pressed savings ind loan associations that provide much of the nation's mortgage money. Much of the rest will be used to subsidize lower nterest rates through existing f e d e r a l Housing Administration home mortgage insurance programs.. Bank mortgage loans are bard to get anywhere, and in associations from the corn- Illinois, Ohio, Missouri, Min- both new and pied single fam- June averaged :ording t o ' t h e Loan Bank Discotheque Fire Brings Murder Charge WHITE PLAINS, N.Y. (AP) -- A young man accused of set- ling a discotheque fire that look 24 lives has been charged with murder. Weslchester County Dist. Atty. Carl A. Vcrgari on Tuesday filed a against Peter Greenwich. Conn., as the firsl step in having him' broughl here from a Bridgeport, Conn., jail. Leonard is being held on ar son and burglary charges stemming from the June 3( blaze at Gulliver's discolhequi murder charge J. Leonard, 22. in Port Chester. N.Y. Con necticut State's Attorney Don aid A. Brown said Ihe charge would be dropped when Vergar issues arrest warrants fo Leonard. ^yhen Leonard was arrestei police said he broke into ; bowling alley adjacent to th discotheque, then set a fire in ; nirsery area to disguise th break-in. icsola. Alabama. Vermont and Vest Virginia, the highest in- crest allowed by usury laws is Mi per cent. By contrast,' Virginia sets no eiling on interest rates. In Vyoming and Utah it is 18 per ent and in Rhode Island, 21 per cent. Bankers argue that housing and mortgage activity is at its owest in . those states where usury laws are toughest. The aws designed to protect the c o n s um e r have rebounded against him, they say, and should be relealed. "Ranks have just stopped making new mortgages," saic making new mortgages," saic a spokesman for the Savings Sank Association of New York From a peak of $19 billion in mortgage commitments in April 1973, the association says savings banks in New York ha commitments of only $3.15 bil lion as of May 31, 1974. What is plaguing the nation's savings banks and sayings anc loan associations is "dis intermediation," a proces where money that ordinaril; would be invested in saving, accounts is instead withdrawn in huge amounts, attracted by the much higher returns of fered by Treasury riotes, cer lificales of deposit, commercial 5apcr and oljior debt vehicle* n the open money markets. That process, spurred by in- latlon and the Federal Rc- erve's tight money policies, las largely dried up the tradi- ional sources of mortgage oans. In the last three months alone, New York State's Â»aÂ»- ngs banks suffered an uulnim 1 of some $740 million. The state's banks had net outflows n all but three of the last 13 months. Tight money policies have sent the federal government scrambling with industry tor the few dollars that can be raised in the nation's credit markets. An Associated Press survey of banks in a number of major cities showed lew, if any. rolling out the welcome mat for mortgage shopper. Shortages of building materials and skyrocketing material prices have dogged the industry : V and driven the price of the average home beyond reach of many. The median price of a new American home t now is $41,000. Last-year, it was $32,000. and in 1970; $23,400;j Material costs and shortages are named the n u m b e r , one problem for home builders in a recent survey by theÂ»National Association of Home builders. The problem had never been mentioned before in 25 years of such surveys.' -. APL Withdraws Latest Testimony On Redfield LITTLE ROCK (AP) -- Arkansas Power Light Co. agreed Tuesday lo withdraw its latest leslimony on Ihe pro j posed White Bluff coal-fired generating plant near .Rcdficld, bul said the testimony might be brought up later as rebuttal testimony. The utility agreed to withdraw the testimony, which was aimed at redesigning the plant, at a hearing held by the state Public Service Commission. The PSC resumes hearings Thursday into APL's request for a certificate of environmen tal compatabilily and public leed to operate the proposed 5850 million facility. The Arkansas Ecology Center and the state departments of Health and planning filed motions Monday to strike from the record the latest APL testimony. Assistant Ally. (Jen. Fred Frawley said the added testimony amounted lo "a substantial amendment to its origitia application, if not a totally new proposal, .which must now be thoroughly evaluated." Frawlej represents the two depart ments. Chairman Pat Moran of the PSC said APL's decision to vilhdra.w the testimony basically leaves the hearing, "in the ame posture it was,to' when ve recessed." APL originally proposed to build four 80Q megawatt units, each w i t h , a 750-foot-chimney. In the latest testimony,', it proposed to . build two ,.i,000-foot stacks, one each scrying two unils, in hopes of making tha facility "more acceptable.". Attorneys argued at Tuesday's hearing that the .latest APL testimony was incomplete, i ,~The PSC held a week-long hearing on APL's proopsal in June. OPEN DAILY S-IO; SUNDAY CLOSED WEDNESDAY THURSDAY AC/DC CASSETTE TAPE RECORDER AIR CONDITIONER 99 Dedicating Plaque Apollo 11 astronauts (1. to r.) Neil Armstrong, Michael Collins -and Edwin Aldrln, read Â· the plaque they unveiled near the ve.hicle assembly building Tuesday at Cape Canaveral, Fla. as Ihe space cenler was dedicated as a national his- toric landmark. 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