percent lower. I think that obtains with all other kinds of materials used in home construction.

In Atlanta, in 1933, the cost of a frame building was based at 64.6. I think this goes back, probably, to an average period prior to 1929. It does not state here just what that is based on, but I am taking the average for 1933. Then in January 1934, that had increased to 68.4, and in April 1934, it was 72.8. That means that there has been an increase of 8.2 over the very low period of 1933. We all know that the administration has demanded that we shorten our hours and increase our wages, which we have done, I think, very consistently, and that, to a large extent, explains why these increases have taken place.

There have been no exorbitant or extravagant increases made, and I can say, for the building industry-the lumber industry, at leastthat if conditions become better, so that the amount of our business increases, we are very ready and willing to make a percentage decrease. We do not want to increase prices. We want to encourage building. We want to get it up to a maximum. We want to employ these men that are unemployed. That is one of the things that we are working for.

Senator GOLDSBOROUGH. You would rather sell a larger volume at decreased prices?

Mr. LEWIN. Exactly. That is just what we are endeavoring to do. We have no desire to increase prices. You can go through this entire area here and you will see how very small the amount of the actual increase is. Prices are very much less today than they were in 1927, even with all these increases in wages and reduction of hours. A man can build a house today much cheaper than he could build it then. Senator BARKLEY. Mr. Chairman, I suggest that that table be put into the record.

The CHAIRMAN. Let that go into the record. (The table referred to is as follows:)

[From the American Building Association News, for May 1934]

RAPID RISE OF BUILDING COSTS

(By Clarence J. Moore)

The rise of construction costs during the past few months has been caused by the increase in building material prices which have resulted largely from the adoption of the N.R.A. code for the building material industry rather than from changes in the relation between supply and demand. The fact remains

that whether or not these prices are economically sound due to the lack of building demand, they are with us today and we will in all probability see further increase in the next few weeks as other codes go into effect and labor rates are further adjusted.

The use of index numbers as a means of determining the magnitude of the variations of the level of prices or costs is analogous to the use of thermometers to measure the variations in temperature. Just as most people are able to distinguish through the faculty of their temperature sense whether it is hot, warm, cool, or cold, so do most people have at least a rudimentary idea of "a high cost of living" or a low level of prices." Very little idea is had, however, as to how hot or how cold it is or as to how high or how low the level of prices is. The thermometer was invented as the measuring device for temperature changes and the index number was invented to measure the magnitude of variations in the level of prices.

Index numbers of construction costs differ from most of the index numbers with which the reader is familiar, such as those representing the market prices of stocks and bonds. The former are applicable only in the specific territory where the building material prices and the labor rates of wages from which they are calculated prevail, while the latter are usually applicable to the country as a whole. Moreover, construction cost index numbers differ with the type

of building because the quantities of the different building materials and the amounts of the different classes of labor differ in each type of building. For example, in a frame residence the item of lumber has more influence than the item of steel, while in the steel frame factory building steel has more influence than lumber. Since the changes in lumber and steel prices do not have an exact mathematical relation, the index numbers for frame residences and steel frame factories would not vary in direct proportions. These factors have been taken into consideration in the calculation of the Boeckh Index Numbers.

Building cost index numbers of E. H. Boechk & Associates, Inc.
[Construction costs compared with United States average prices 1926-29=100]

Compiled and copyrighted by E. H. Boeckh & Associates, consulting valuation Engineers, Cincinnati, Ohio.

Mr. LEWIN. I am not going to duplicate a great many of these statements that have been made. It is getting late and you gentlemen want to go to luncheon pretty soon.

This is from the United States News, published in Washington: In. 1928 there were $2,788,000,000 of construction; in 1933, $300,000,000As a result of a survey of the United States in our national organizat tion, I can say that today, by and large, there is not over 15 percene of the normal volume of business in the construction industry. Th C.W.A. work helped labor, helped put some employment back, bu so far as actually helping industry at large is concerned, helping our industry and the building industry as a whole, it has done very little good, and we are not much better off than we were a year ago. The CHAIRMAN. Do you think this bill would be helpful in every way?

Mr. LEWIN. We have gone over it, Senator. There has already been some criticism of it, but, by and large, I believe it is workable. These gentlemen have put a tremendous lot of time on it, and I know they are capable and intelligent. So far as these institutions that are lending money are concerned-or have not lent it-I can tell you that in my home town there are a number of people who do not want to borrow money, but they want to get out of the institutions the money that they have deposited, and which they cannot get. They are willing to put up homes. One contractor told me he had a customer who had $24,000 in an institution. He wanted to draw it outnot all of it, but he wanted to get $8,500. He was told that he could get probably $600 of that money. I have sent down here to the Emergency Council information of that character. Some people are afraid to say very much about it because they are afraid of reprisals. That is an unfortunate situation. The people have money and they cannot get it out. They do not want to borrow money. They only want to get what belongs to them. You can see the effect it is having on the construction industry today.

Senator BARKLEY. Do you think that all titles of the bill, then, constitute a complete plan that would be crippled by the elimination of any title to the bill? Is that true?

Mr. LEWIN. I think we could unqualifiedly endorse it.

I want to say one more thing, Senator, if you please. Speaking of this amortization, we have had in times past 50 to 60 percent first mortgages, and then we had second mortgages. The second mortgages have either been taken over by a builder, who discounted them at a very huge discount, or else he has high-pressured the material dealer to take them. Unfortunately we have a lot of them right now. I can tell you we are cured. We do not want them. A great many of those second mortgages run concurrently with the first mortgage. They have to be paid. It makes a tremendous load for the working man to have to make weekly or monthly payments. If that is amortized over a period of 15 or 20 years in one mortgage, the reduction in the monthly and annual payment is very great, and that relieves the worker from a lot of the burden he is now carrying. That is one of the reasons I think we have had so many foreclosures-the fact that with these first and second mortgages a man was simply not able to carry them, even if he was working, because he had his wages reduced. At a lessened rate he could probably have gotten by. The CHAIRMAN. Are there any other questions?

Senator BARKLEY. Your answer to my question is "yes" if I understand it. You think the elimination of any one of the titles of this bill would make it incomplete and cripple the effect as a whole? Mr. LEWIN. Senator, as the gentleman here representing the Federation of Labor said a while ago, you need speed. If you do not get it, you are going to have a lot more C.W.A. workers this winter, and more need for money to come out of the Government.

The CHAIRMAN. What Senator Barkley is after is to know whether you would take away title 2 or 3, or any other part of the bill, or whether you want it all.

Mr. LEWIN. I am in favor of no changes in it. I think these gentlemen have made a complete study and are entirely capable of handling the situation, and I cannot see, in the long run, where it will injure anyone. I am in favor of it as it is.

The CHAIRMAN. Very well. We will have to hurry on, now. Mr. McCarthy, we can give you a few minutes.

STATEMENT OF E. AVERY MCCARTHY, REPRESENTING CALIFORNIA STATE REAL ESTATE ASSOCIATION AND OTHER CALIFORNIA INTERESTS

The CHAIRMAN. Mr. McCarthy, please state your name, residence, and occupation.

Mr. MCCARTHY. E. Avery McCarthy; past president of the Los Angeles Realty Board; chairman of the finance and mortgage committee of the Los Angeles Realty Board; director of the California. State Real Estate Association; and a member of the National Association of Real Estate Boards.

Mr. Chairman, after an experience of more than 40 years in San Francisco, Oakland, and Los Angeles, as a borrower as well as a lender, and as a builder of small homes, and as a dealer, agent, and realtor almost exclusively in the field of small homes, I offer you my impressions as such, rather than as a financial expert. In these times and under present conditions, I doubt if there is any such animal as an expert.

My company was incorporated in 1892 and has been continuously operating in the small-home field since.

Interest reduction, to my mind, is a foregone conclusion, and any opposing thought to this bill based on opposition of lending companies to lower interest rates should be closely scrutinized by you gentlemen, I believe. More homes have been lost to the small home buyer, in my opinion, by high interest charges and excessive service costs, than from any other reason.

The engine of the old machine of mortgage lending seems to me to need a thorough overhauling, reboring, servicing, lubricating oil, gas, ignition, and new batteries.

Senator BARKLEY. Outside of that it is all right?

Mr. McCARTHY. Outside of that it is all right; yes. Perhaps you have had a little experience trying to borrow money from them. I do not know. I have.

This bill will not, it seems to me, adversely affect banks and mortgage companies, but will, in the end, stabilize them in a way that they have not apparently been able to stabilize themselves. The effect of this bill will be to shorten the time of complete recovery.

The small home owner should be the backbone of America. In the past he has been overcharged in the cost and price of his home.

has been given short-time loans that should have been long-time investment paper, and has been put to heavy costs every few years for loan renewals on a loan that should have been, from its very nature, originally on a long-term basis.

The banks, mortgage, and loan companies and their officers with their experience, have known that it would be impossible, under usual and ordinary circumstances, for the small home purchaser to pay for his home in any less time than an average of 10 years. They have, nevertheless, made loans to him on a 1- 2- or 3-year basis, at the end of which time, to his surprise and chagrin, he has had to pay heavy expenses for renewals. I repeat, these loan agencies in the past knew full well that the small home purchaser could not pay up in the short period of time for which they have made their loans.

There is a market now in many American cities for new moderatepriced homes. There are just as many prospective American home buyers who will buy new homes, but who will not buy old or secondhand homes, as there are purchasers of new automobiles as against second-hand automobiles.

This proposed bill will be a boon to tens of thousands who would be individual home owners. In California we need just such a set-up as is proposed by this bill. In fact, we need, and need immediately, just such help and relief as will be afforded by this bill, and by a proposed amendment which is, after all, only an added feature, just to explain the bill, giving immediate action and relief-an added suggestion of the National Association of Real Estate Boards, which was proposed to you and made of record here by Mr. Walter Schmidt, of Cincinnati-I think it was at yesterday's session. This proposed amendment if not a criticism in any respect of the proposed bill, but a whole-hearted approval of the bill itself, and a suggestion to put the general conditions and proposed help into more immediate effect.

We, in California, lack the financial assistance of banks and mortgage companies for loans on new building operations. Mortgage banks and loaning companies do not refuse, but they do not make such loans. That, I think, is very general, gentlemen, throughout the country. That has been my observation. They advertise, "We have money for mortgage loans," but you go to them for those loans and cannot get them.

With an untarnished business record of more than 40 years, my company, a comparatively small real-estate and building corporation, has been refused new building loans in San Francisco and Los Angeles. We could build and sell several hundred new houses right now to the small home owner.

Senator GOLDSBOROUGH. Costing about what?

Mr. MCCARTHY. Costing about $2,000 to $2,500 for what we call a California bungalow, with a selling range of under $4,000. That is the ideal thing for that country, as it does not require the heavier construction that is required in the East.

To this bill all American small home buyers looks for these equitable advantages:

First. Moderate interest rates.

Second. Small amortization.

Third. Long time loans without short periods of expensive renewals. Fourth. Moderate loan costs.