Indianapolis Times, Indianapolis, Marion County, 26 December 1938 — Page 22

ndiana Business i in 1 938

Slight Increase Is Noted In Requests for Loans; Real eal Estate Trails 1937

Next Year Pro Promises to Furnish More > Activity.

By DR. ARTHUR M. WEIMER I. U. Real Estate Professor

During 1938 the volume of real estate activity in ‘Indiana lagged behind the levels established in

193". Similarly, the amount of mort- | gage activity ‘was smaller than that of last year. During the first half of this year, | real estate transactions were con- | siderably smaller in number than | in the first half of 1937 and more | nearly resembled the amount of business transacted in the corres- | sponding period of 1936. | The general business recession ap- | parently accounted for this condi- : tion. Flowever, since July the difference | between the amount of real estate activity in the last two years have “not, been marked, and while the | amount of ‘business transacted in | recent. months has not equalled the 11937 levels, {it~ has been nearly as - great. | ‘rhe volume of mortgages re- | corded closely approximated the | number of real estate transactions | during the current year and re- | ‘mained below the amount of mort- ' gaze business reported for 19317. However, the number of mortgages recorded in the last half of this year | compared favorably with the corresponding period of a year ago.

Transfers Drop

These general changes were typ- | cul of each of the six major urban | counties of Indiana: Allen, Lake, | Marion, St. Joseph, Vanderburgh | and Vigo. In the first 11 months | of 1938, a total of 30,528 transfers | of real estate property were re- | | corded in these counties, while in | the corresponding period of 1937 . such transfers numbered 36,748. | Similarly, the mortgages recorded in . the first 11 months of the curTent year totalled 17,012 as com- | pared to 19,425 for the same months | in 1937. | * The real estate and mortgage | | markets in each of these major ur- ' ban counties of Indiana were de- | pressed in the early months of the | current year, but exhibited in- | creased strength in recent months. | Of special significance was the in- | creased volume of residential build- | ing in each of these centers during | the fall of this year, and the low | vaecancy-occupancy ratios reported. |. An importnat stimulus was given | to real estate, construction, and | mortgage activity by the enactment | of admendments to the National Housing Act in February. Expansion | of provision for insurance of mort- | gages on rental housing. projects |. and the provision for insurance of g0 per cent mortgages secured by | new single-family residences valued at $6000 or: less, apparently gengrated a considerable volume of activity. Throughout the months since these revisions were made, the Indi- | ina FHA office reported a greater | volume of insured mortgages than for corresponding months in 4he vears since mortgage insurance was first provided in 1934. Especially marked advances occurred in the aumbeér of mortgages secured by new construction.:

Expansion Noted

Similarly, the member institutions of the Federal Home Loan Bank of | ‘Indianapolis reported gains in the number of mortgages made for the | purpose of financing new construction, although the number of homepurchase mortgages lagged behind | 1937 levels sufficiently to reduce | their total volume of business to a point below that attained last year. Some expansion in the activities of the U. S. Housing Authority in| Indiana occurred during the current, year, although no. far-reaching pro-| grams for slum clearance of sub“sidized housing were developed. Considerable attention was attracted by the so-called “Ft. Wayne Plan”, which contemplated slum clearance and low-rent housing through the use of private capital and mortgage insurance. However, this plan did not develop beyond embroynic stages during the current year. In the minds of most observers, 1939 promises to provide a greater amount of real estate and mortgage activity than developed in 1938. It is highly probable that a sufficient |, amount of business will develop to approximate or exceed the levels attained in 1937. Factors favorable to this prediction include the improvement of general business conditions in re.cent months, the continued housing shortage in many Indiana cities, and the more favorable financing terms being offered. On the other hand, rising construction costs may hinder advances in the volume of building: and thereby tehd to prevent such a rapid expansion of "real estate. and mortgage activity as is ‘anticipated in many quarters.

JUVENILE. COURT AIDS WILL ATTEND SCHOOL

I’m Going to Ge to Go Myself; Judge Bradshaw says.

|

Attending night school sociology classes regularly for several months will be one of the requirements for the néw probation officers in Juvenile Court after Jan. 1, Judge- : Sloot. Wilfred Bradshaw Sa

The judge said he will engage a university professor to conduct . the classes, starting next month. “Probation officers who expect to

stay on the Juvenile Court staff|

will have to attend the classes or . they will be replaced,” Judge Bradshaw said. “I'm going to attend . the classes myself to get as much knowledge on the subject as pos-

gible.” : He'll Attend Too He also said he plans to visit Juvenile Courts in other cities “to absorb any new ideas in handling children.”

al months I intend to ; with many new meth‘ods .on i WE in hearing children’s cases and in getting juveniles placed in proper. homes when C ble,” he said. oal will be to build this|r . the rank.

Bank Investments High. est Since 36, Expert Of I. U. Says.

By DR. H. C. SAUVAIN

Director, I. T, investment Research

. The most encouraging development to commercial bankers of Indiana during the past year has been the slight improvement in demand for loans by qualified borrowers. Although current data for Indiana banks as a group are not-avail-able, figures published currently by the Federal Reserve authorities for member banks in the Chicago and St. Louis Federal Reserve Districts indicate clearly that the shrinkage in demand for loans. which began with the business recession of 1937 has given way to renewed expansion. Since last summer the commercial banks through this part of the country have been reporting somewhat higher totals for loans, particularly those for ordinary business purposes. This improvement is of course. attributable to the vigorous upswing in business which has developed during the last half of the year and which has caused many business concerns to seek additional bank credit in order to finance a larger volume of business. With most ‘business observers optimistic about business prospects for 1939, it would appear that the outlook for some further. increase in bank loans is moderately favorable.

Investments vs. Loans

The trend of bank investments during the last year.or so has been almost directly opposite to the trend of loans. The contraction in loans concurrent with the business recession provided the banks with additional funds for whiéh they were {obliged to seek employment in bond investments. As a result security holdings have increased quite appreciably since the latter part of 1937. As a matter of fact, this up{ward trend has not yet been affected by the recent expansion of loans and total bank investments are currently at the highest level since 1936. However, the banks have in general followed conservative policies in adding to their investment holdings. According to studies made by the Investment. Research Bureau at Indiana University they have adhered to relatively high standards of quality in selecting new securities. There has been a general tendency to increase the proportion of securities of short maturity in bank bond portfolios in order to reduce the risk of price depreciation in event of a rise in interest rates. Despite recent relatively faverable developments, the banks are still confronted with a difficult problem of providing adequate banking serv|ice to their communities and at the | same time earning a reasonable re[turn on invested capital. Good business loans are still very scarce. At the same time yields on security investments are extremeld low and bank operating expenses remain relatively high.

New Era Appears

- The earnings problem is, however, merely a manifestation of the much more serious and fundamental problem of adjusting the banking system to changed conditions in the [country’s economic system. Our banking system was developed pri- | marily as a mechanism for providing short-term, . preferably selfliquidating loans to business and agriculture. In the last two decades the need for loans of this type has steadily: diminished as the financial needs of business.-have changed and as other methods of financing those needs have developed. Today the average bank is able to employ but a very small fraction of its total resources in loans of the “old-fash-joned” type. The principal reaction of the banks to this change in loan demand has been to shift their funds into securities and the result has been to create new and difficult problems both for bank managements and for bank supervisory authorities. Both are still wrestling with these problems. Meanwhile there has been a great deal of public agitation for banks to make loans of a longer-term character than has been customary; to supply’ business with capital needed for ordinary

operations over a perind of years}

rather than temporary loahs for a few months. The bankers, however, are acutely aware of the fact that the bulk of their deposits are payable on demand and that even on time deposits their notice of withdrawal may be short. Naturally, they are averse to tieing up depositiors’ funds .in such .a manner that they Ab not be available when de Thus, commercial bankers are confronted with a serious dilemma. The type of loans they. are organized to make and which are’consistent with the nature of their deposit liabilities are not in sufficient demand to support the average bank. Both the need for earnings and the pressure of public agitation urges them in the direction of long-term 16dns for capital purposes. but as. they move in this direction they jeopardize their liquidity. How these conflicts’ eventually will be resolved, no-one can predict accliratelys Perhaps the most encouraging aspect of the matter is that the commercial bankers in general are alert to the nature of their problem and are seeking vigorously lo work out their salvation.

PENSION BACKERS ADOPT NEW NAME

The American Pension Plan, a movement sponsoring a $30-a-week pension for persons over 50 years of ago, today had filed amendments to its articles of incorporation with the Secretary . of State,, changing its name fo the American Recovery Plan, : The amendments also included a provision for increasing the organization’s board of directors from three to five members. The Plan has opened its national headquarters on the sixth floor of the Occidental Building and its backers are preparing to launch a

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