Columbia University Libraries Digital Collections: The Real Estate Record

Real estate record and builders' guide: [v. 95, no. 2458: Articles]: April 24, 1915

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REAL ESTATE AND i^ BUILDERS [Pill, NEW YORK, APRIL 24, 1915 .........,:,,liliilllH^ FINANCIAL CHANGE AIDS "BUILD NOW" PLAN ■ L Iiiiiii^ ...... Effect of the \ctivity on the Stock Market Upon the | Construction Situation—How Prosperity is Produced | .aiilli.....lllliliiiW^^^^^^^ ......MilllilllllliiiifilliM .......ilMllilM^^^^^^^^^^ OI>SER\'MRS of buildiny: finance have noted, with satisfaction, signs of the times indicating a pronounced upturn in general business conditions'. There is a growing opinion that the building in¬ dustries and miterial manufacturers have seen the worst of the depression. Optimism is the rule to-day, not the exception. Business men since the first of the year have spoken of business as being good, but collections slow. They speak of business to-day as brisk and with collections improving. Great industries are contemplating ex¬ tensions to plants, notalily the Sauer- Mack Automobile Company, the Ameri¬ can Locomotive Company, the American Macliine & Foundry Company, the Cruc¬ ible Steel Company of America and the Bethlehem Steel Company. The Lehigh Valley Railroad, according to President Thomas', is ready to spend a million on improvements, President Truesdale of the Lackawanna Railroad, has been out on the road in contempation of a great expenditure of money. The Central Rail¬ road of New Jersey recently has placed an order with Harlan & Hollingsworth for steel cars and have more orders of the same character to give out. The New York Central stands ready to re¬ lease car, locomotive and rail orders. Cement Prices Low. In the l)uilding material market Port¬ land cement shipments for March in¬ dicate, if maintained, an annual produc¬ tion of 100.000,000 barrels, or 12.000.000 more than ever has been produced in a single year. Prices are very low. Com¬ mon brick is conspicuous as being the only building commodity that is over produced. Lime, crushed stone and sand are in such demand as to require in¬ creased plant capacity. About 1,500 more union artisans arc employed to¬ day than in the same time last month. And the Eastern building season is hardly under way. Stock market transactions have re¬ cently exceeded a million shares a day. More than $20,000,000 in gold has been sent this month to this market from Ottawa to insure continued credit for English Iniyers here. The lawmakers of state and nation liave about reached the end of their labors, a fact which doubtless inspires renewed confidence in all kinds of investors and especially in the hearts and minds of captains of in¬ dustry. Savings banks are reporting in¬ creased deposits. They arc actually re¬ developing their surpluses. Bank Surpluses a Sign. The first sign of returning prosperity is not always to be found in the number of orders for building materials reported nor in tlic condition of the real estate market, nor in the condition of the United States Steel Corporation's table of unfinished steel orders. Instead, the first signs should be looked for in the condition of bank surplusses. Some may entertain the mistaken notion^ that the shrinkage in the surplus of saviiigs banks is of little consequence to the individual depositors in these in¬ stitutions, and that therefore such SIGNS OF PROSPERITY. $20,000,000 in Gold Returned to the U. S. A. Stock Exchange Transactions 1,- 000,000 shares a day. Savings Banks are Developing their Surpluses. Industrial Plants are Building Ex¬ tensions. Railroads are Releasing Orders Long Held Up. Skilled Building Labor is Better Employed. Current Business-Baiting Legisla¬ tion Nearing End. Building Materials are in Better Demand. Money for Construction is Easier to Obtain. shrinkage cannot have any effect upon the placing of railroad rail orders, struc¬ tural steel business or the purchase of lime, brick and cement. But this is a serious error. Savings Banks* Surplus. It is necessary for the savings banks to maintain a certain surplus as a matter of prudence and precaution and to in¬ sure their solvency beyond peradventure. Therefore, as the existing surplus began to dwindle because of the depreciation of the niarket value of the securities held, it became necessary to restore by degrees; the lost portion by making ap¬ propriations for the purpose out of cur¬ rent earnings. Such appropriations in turn, diminished the amount which would be distributed in dividends to de¬ positors, and hence these depositors have been receiving considerably less than would otherwise have been the case. New York savings banks are all mutual institutions, the profits going en¬ tirely to the depositors and on the basis of the current rates of return on the in¬ vestments in which savings banks are allowed to employ their funds, the de¬ positors in these institutions ought to be getting 4j/ per cent per annum in dividends. As a matter of fact some of the largest institutions wete paying only 3V2 per cent, having had to reduce to that fig¬ ure owing to thc necessity of using part of their current earnings in order to make good thc impairment of their surplus account. Savings Bank Securities. Large quantities of savings bank securities are invested in railroad stocks. In Maine, during 1913, 50 per cent was thus invested, in Connecticut 38 per cent, and in New Hampshire 33 per cent Massachusetts, New York and New Terse)' ratios ran irom 15.96 per cent to 19.61 per cont. The number of de¬ positors in these six states numbers almost 7,000,000 people. Combining the railroad investments of insurance com¬ panies, and educational institutions with those of savings banks, about $1,464,- 388,642 in railroad securities were thus held. When American gold is being shipped abroad in large quantities, as marked the period immediately following the out¬ break of the war, the manufacturer, the real estate investor and the prospective builder cannot readily effect loans to tide him over a consequent period of poor collections or commercial paralysis. The only alternative was to shut down. Hundreds of savings bank depositors were thus deprived of their incomes and instead of depositmg they were com¬ pelled to withdraw nioney. This resulted in a shifting of funds in the banks to retain a safe reserve which cannot be recovered from railroad securities be¬ cause of decreased earnings in the traffic departments. Building construc¬ tion suffered. Revival of Business. It is just such a period from which we are emerging. The railroads are be¬ ginning to feel an increased amount of business. They asked and received, in some instances, a 5 per cent, freight rate increase which partially makes up for the sub-normal freight shipments. When thc danger is passed with the adjourn¬ ment of the legislatures, of additional lousiness-baiting legislation and if the full crew bills are repealed, the earn¬ ings will be increased, the demand for railroad stocks will improve, savings banks can again begin to pay dividends, the building investment niarket will regain its strength and materials will begin to move into new construction work. This is what is happening to¬ day on the Stock Exchange and in the building material market. It is shown in increased employment of skilled building artisans. Predictions Fulfilled. The Record and Guide, in its issue of January 30, said that the big interests of the country were advised of the turn for the better and were planning to build. They knew what was in store for thc securities niarket. To-day their pre¬ dictions are fulfilled. The New York Stock Exchange had not known what several consecutive million share days were like, in several years. People are more confident. They are reinvesting their money. And real estate will be the next in line to benefit because money is being made more available to "Build Now." A wave of confidence is rapidly spreading over the country. The enor¬ mous buying power is being turned loose, and its beneficial effect is being felt, at thc present time. This is. how¬ ever, only a beginning. Those who are in intimate touch with the situation cannot see anything but a long swing of prosperity in the immediate future. Real Swing Launched. Last November the Record and Guide printed reports from several leaders in various lines, in which the present move¬ ment was clearly forecasted. It was also pointed out that before the final move¬ ment was commenced a "false start" would appear. This happened last Feb¬ ruary, but now the "real swing" seems to have 'been launched.