there is still a broad demand for repossessed homes if they are placed in good condition and offered at competitive terms. The disposition of the real-estate overhang, while being of national importance, is largely a regional problem. Studies made by the Federal Home Loan Bank Board indicate that three States, New York, New Jersey, and Pennsylvania, account for almost one-half of the total overhang in the entire country. Naturally, financial institutions in these States are most affected by the large volume of real estate they own, and particular efforts should be made to cure the situation in these three States. Regional Variations of New Construction Close observation of building activity in recent years reveals two significant features: concentration of residential construction in a few selected regions of the country, and a decline in the average cost of new dwellings placed on the market. The rate of residential construction is never uniform throughout the country. The different degrees of development of the various parts of the Nation, migrations from one region to another, and varying intensities of prosperity cause marked regional variations, and the over-all picture for the Nation therefore gains in significance by observation of regional trends. The map between pages 28 and 29 shows the regional distribution of residential construction in all cities of 10,000 or more population, from 1936 through the first half of 1939, by Federal Home Loan Bank Districts, expressed in terms of number of dwelling units built per 100,000 population.3 In the last few years, the relatively largest growth of residential construction was in the Southwest (Los Angeles District) where population pressure has stimulated new building. The second largest gain was in the South (Little Rock District) where the housing need was greatest and the improvement in business conditions most prominent-partly as the result of industrialization. The same holds true for the Southeast (Winston-Salem District) which ranked third in the rate of residential construction. The New York District showed the fourth largest rate of building, due primarily to the rapid development of suburban areas. Approximately 70 percent of total building activity in 1938 and the first six months of 1939 was concentrated in these four regions. On the other hand, the rate of construction in the Boston, Pittsburgh, Cincinnati, Chicago, and Des Moines Districts was far below the average rate for the entire country. For actual figures underlying the bars on the map and for explanatory notes, see Exhibit 6. Importance of Smaller Communities and of Home Building Approximately 58 percent of the total nonfarm dwelling units built in the calendar year 1938 was in communities with 25,000 population or less, although these communities represented only 46.6 percent of CHART XIV DISTRIBUTION OF RESIDENTIAL CONSTRUCTION IN 1938 BY SIZE AND TYPE OF COMMUNITY® CITIES OF LESS THAN 25.000 POPULATION Estimated by the Construction and Real Property Section, United States Department of Commerce. the total nonfarm population and 46.8 percent of the total number of nonfarm families in 1930. Chart XIV illustrates the distribution of residential construction among cities of more than 25,000 population and cities with 25,000 population or less, in 1938. For the latter cities, building activity is shown separately for "satellite" communities, that is, suburban communities in metropolitan areas where construction is influenced THOUSANDS OF UNITS by the growth of metropolitan centers, and for "nonsatellite" communities which are independent and nonsuburban. The higher rate of residential building in smaller communities is due in part to a higher birth rate and faster population growth, and to a cessation of migration to the larger cities. It is also attributable to particularly active building in suburban areas; but about two-thirds of total residential construction in cities with 25,000 population or less was in nonsuburban communities and only one-third in "satellite" communities. It is in the smaller communities, both satellite and nonsatellite, that the proportion of one- and two-family homes in total residential construction is highest, and it is in those communities where specialized home financing institutions of the savings and loan type are most numerous. Within the total building activity of the country, home construction and home finance have the foremost place. This is further evidenced by the overwhelming proportion of one- and two-family dwellings in total nonfarm construction throughout the country, as shown in the above chart.4 For actual figures underlying this chart, see Exhibit 7. THOUSANDS OF UNITS Building for the Mass Market Better adjustment of prices to the consumer's ability to pay was perhaps one of the most important tendencies of the building market in the last fiscal year. Analyses of the income distribution of families have demonstrated that in the past the construction industry has been building homes priced far too high for the mass of American families. This failure to tap the broad mass market has not only impeded the satisfaction of the Nation's housing needs, but it has also limited the volume of new building and consequently economic activity in general. During the early Thirties, the average price of new homes had already dropped. However, this was in a period of a declining general price level and of a decreasing volume of construction. In contrast, the recent reduction in average prices at which new homes are offered occurred in a period of growing volume of construction, and of rising costs of building material and labor in 1937 and only slightly declining costs in 1938. Nevertheless, price reductions were made possible by a greater willingness of home buyers to purchase dwellings of smaller size and simpler design. Moreover, the building industry has been concentrating more fully in the broad area of mass demand. In the last two years, considerable pioneering has been done all over the country to meet the housing needs of families with moderate incomes, and more of such pioneering is under way. The results thus far achieved are presented in the following table: Average cost of new dwelling units in cities of 2,500 population and over, by types of 1936. 1937 1938 1939 2 Calendar year dwellings 1 1 Based on building permit data of the Bureau of Labor Statistics. Although permit valuations do not reflect the final cost, their movement from year to year may be held to be indicative of the general direction of costs. January to June. From 1936 to the first half of 1939, the average cost of new dwelling units decreased in all types of dwellings, one- and two-family homes as well as multifamily structures; the decline was more than 10 percent for all types of units built. As the volume of public housing throughout that period was comparatively small, the decrease in average cost reflects, to a great extent, attempts of the private building industry to provide simpler and less expensive homes. Despite such progress, the building industry still has a long way to go before the price of its product will be more fully adjusted to the incomes of the majority of our families. The selling price of the |