Vhat the E*perts See Ahead fo, YOU in 1959

Spending for new construction is expected to rise 7/o to a record $52.3 billion in 1959, thus passing the $50-billion mark for the first time, according to outlook estimates prepared jointly by the Departments of Commerce and Labor. About $48.4 billion of expenditures are in sight for 1958.

Most of the $3.S-billion increase in construction expenditures in sight for 1959 will be in residential building (public and private) and highways, which together will account for almost four-fifths of the advance over 1958.

The anticipated dollar volume of new construction in 1959 is based on the assumption of a continued rise in the nation's total output of goods and services. Despite increased demands for credit from other sectors of the economv. it is assumed that funds for construction will be generally adequate, but money for home mortgages probably will become less readily available at the comparatively low downpayments and interest rates prevailing in 1958.

1.2 Million flouses Predicted fbr 1959

Next year will be home building's biggest since 1955. This is the prediction of Housing Economist Miles Colean in his annual forecast in }Iouse & lIome, professional magazine of the home building industry. He expects nonfarm starts to reach I,215,000 in 1959-up about 90,000 from this year. This would make 1959 one of the biggest years in home building history, about equal to 1954 and exceeded only in the peak years 1950 and 1955.

Chief reasons for home building's bright outlook are the improved economic climate and the return of an adequate supply of mortgage money, says Colean. He explains: "Incomes will be up. The recession will have run its course. The probable mood: optimistic-but not reckless."

On mortgage money, Colean notes that assets of savings institutions are rising, so they should have a healthy supply of funds for conventional mortgages. FHA financing should cover about 275,N0 single-family starts-55,000 more than this year and almost 119,000 more than in 1957.

Private and public residential building

An ll/o advance in total new residential expenditures is anticipated during the coming year-from $18.5 billion to $20.6 billion. This-projected re"sidential volume accounts for approximately two-fifths of the total to be spent for new construction in 1959. The gains in residential building over 1958 will come mainly from a 13-percent (91.7 billion) incre.ase in expenditures for new private nonfarm dwelling units to $15.0 billion.

In addition, spending for publicly owned housing will exceed the billion-dollar mark for the first time, rising by almost $300 million to $1.1 billion. Additions and alterations to housing will probably rise also after a mild downturn this year.

The outlook is that approximately 1,200,000 new nonfarm dwelling units (private and public) will be started in 1959, compared with about 1,170,000 in 1958. Construction costs are expected to rise moderately. o^'o:",','tt'

The increase in new private housing outlays also reflects an expected rise in the average construction cost of the units built. The apartment boom of the past two years appears to be lessening, so that the proportion of such units (which are smaller and cost less, on the average, than single-family houses) is likely to decline in 1959. Moreover, under the less favorable mortgage terms anticipated for 1959, and as builders use up the relatively large volume of 1958 commitments for moderate-cost houses with Government-backed mortgages, the proportion of higher-priced single-family houses may be expected to rise.

He adds: "That forecast is based on the assumption that the government will be wise enough to do two things:1) not lower current FHA interest rates, 2) raise them if that's what is needed to let home building compete with other borrowers. Right now FFfA's ceiling is barely high enough to meet non-housing competition for funds."

Veterans Administration financing probably will not be a major factor in l959-particularly as long as the interest rate remains fixed by law at its below-the-market 4fu/o rate, says Colean. He predicts no more than 110,000 VA starts.

Two forces will spur house sales next year, Colean predicts: 1) higher incomes mean more families can afford to buy homes and 2) slowed housing output leaves the industry with no excess inventory of unsold homes. At the same time. disaster, demolition, abandonment and conversion are taking up to 500,000 units a year out of the housing market. Highway construction and urban renewal problems are sure to keep this rate high or push it even higher.

Higher family incomes, the high rate of demolition and a low vacancy rate, Colean concludes, should offset the present low rate of family formations and should support a steady market of. 1.2 or 1.3 million units a year.