is coming to this conclusion. By the time the 1975’s roll out on the
streets the price differential, on the average from the 1973’s, will be
$1,000, and in many instances far more than that. The real income
of consumers will be substantially lower than it was two years ago.
Under these circumstances it is rather difficult to forecast any
appreciable improvement in this component of durable goods.
Consumer spending on other durable goods, such as furniture
and appliances, is also likely to slacken because of the related
weakness in the housing market. There is very little prospect that
we are going to see any appreciable improvement in consumer
spending for durable goods. Quite frankly, we will probably see a
further deterioration from current levels for the remainder of this
year.
Now, turning to the investment sector, we find some very seri-
ous questions. The housing industry is not concerned with defining
a recession; by any definition it is in a pronounced depression.
Housing starts in July were running at an annual rate of little more
than 1.3 million units. This is about half of the number a year
earlier. Housing permits, which offer some advance indication of
what activity levels are likely to be some months down the line,
were roughly 40 to 50 percent behind a year earlier. We may yet
see a further drop in housing starts to an annual rate of perhaps a
million units by year end. Housing starts for the year as a whole
will probably average under 1.5 million units. Last year they aver-
aged 2.1 million.
This situation, of course, is a consequence of a variety of fac-
tors, especially the incredible increase in the median price of new
housing. In four years the median price of a new house has risen 50
percent. The median single unit dwelling price in America today is
about $35,000. And if anyone is looking for something under
$20,000 to $25,000, chances are nine out of ten that he is going to
have to settle for a mobile home. We no longer build, to any ap-
preciable degree, the kind of houses that used to represent for
many the culmination of the American dream—one’s own single
family home. As we look around at the garden apartments and
condominiums we may, in fact, be seeing the shape of future resi-
dential dwellings in America.
Construction costs have been rising tremendously. Interest
costs and mortgage costs have also been rising. For all practical
purposes, unless sellers of existing houses are willing to pay a very
substantial penalty in points, they are just not going to find people
in a position to deal for their houses. So the housing situation is